The U.S. Securities and Exchange Commission’s (SEC) Investor Advisory Committee (IAC) submitted its opinion on cryptocurrency asset regulation to the SEC on Thursday.
The committee said nearly all cryptocurrency tokens are securities and urged the SEC to prioritize enforcement actions related to crypto assets. The IAC was formed to advise securities regulators on regulatory priorities, arguing that many investors have suffered significant losses, estimated at more than $2 trillion, from investing in crypto assets.
Several prominent cryptocurrency companies have either filed for bankruptcy or faced civil and criminal charges. The letter also notes that cryptocurrency assets are vulnerable to fraud and abuse, noting that the semi-anonymous and borderless nature of cryptocurrency transactions facilitates illicit activities such as money laundering and tax evasion.
The IAC further emphasized the need for the SEC to step up its enforcement efforts in the cryptocurrency space. The committee recommends that the SEC take a proactive approach to identifying and prosecuting fraudulent activity involving cryptocurrencies, and that the SEC work with other regulators and international counterparts to enhance global regulatory coordination of cryptocurrency regulation.
The IAC acknowledged the rapid growth and innovation in the cryptocurrency market, but also highlighted associated risks and challenges, including lack of investor protection, market manipulation and potential systemic risk.
The committee’s opinion comes as the SEC is increasingly focused on regulating the cryptocurrency industry. In recent years, the SEC has taken enforcement action against several high-profile initial coin offerings (ICOs) and cryptocurrency exchanges for alleged violations of securities laws.
The SEC has also been reviewing the classification of cryptocurrencies as securities, which would subject them to federal securities laws and regulations. The IAC’s opinion is consistent with the SEC’s position on the regulatory status of cryptocurrencies as securities and reinforces the need for strong enforcement in the cryptocurrency space.
The IAC’s recommendations are expected to have a significant impact on the SEC’s approach to cryptocurrency regulation. With the growing popularity and adoption of cryptocurrencies, the SEC faces increasing challenges in ensuring investor protection and maintaining market integrity in a rapidly evolving environment.
The Commission’s recommendations to prioritize enforcement actions related to cryptocurrencies underscore the need for regulatory clarity and strong enforcement to address the risks and challenges associated with this emerging asset class.