What is SEC? The main enemy of cryptocurrencies or the right regulator?

If you have a good understanding of what blockchain and cryptocurrencies are, you’ve probably heard about the SEC more than once. Often this abbreviation comes up in a negative light from representatives of the crypto world. In this article we will tell you what the SEC is.
The Securities and Exchange Commission (SEC) was established in 1934 amid the Great Depression, shortly after Congress passed the Securities Act of 1933, the first federal legislation regulating the issuance of securities. The purpose of creating the agency was to ensure compliance with this law and regulate the securities market.
The Securities and Exchange Commission (SEC) is a regulatory body in the United States charged with protecting investors, maintaining fair and efficient markets, and promoting capital formation.
The SEC oversees the activities of broker-dealers, investment companies, investment advisers, clearing agencies, transfer agents, credit risk rating agencies and stock exchanges. In addition, the commission oversees organizations such as the Financial Industry Regulatory Authority, the Municipal Securities Rulemaking Board and the Public Company Accounting Oversight Board.

The agency's jurisdiction was further expanded in 2010 with the passage of the Dodd-Frank Act to include, among other things, municipal councilors.
Within the SEC
The agency's leadership includes up to five commissioners who are appointed by the President of the United States with the approval of the Senate. No more than three representatives of one political party are allowed on the commission.

The agency is divided into several key divisions, each of which performs specific functions. These include departments for enforcement, corporate finance, economic and risk analysis, due diligence, trading and markets, and investment management.

Each of these divisions contributes to strengthening the agency. For example, the Division of Corporate Finance ensures that investors are provided with the critical information needed to make informed investment decisions, and the Division of Enforcement investigates possible violations of federal securities laws.
Three SEC Goals
The Agency's mission is to protect investors by ensuring their access to reliable and timely information about publicly offered securities, as well as protecting them from fraud and manipulation.

In addition, the SEC works to maintain fair, orderly, and efficient markets by regulating the activities of exchanges, brokers, dealers, and other financial industry participants.

Finally, the SEC facilitates the capital raising process for companies by overseeing the issuance of new securities and ensuring compliance with established rules and regulations.
SEC's Role in Cryptocurrency
According to news reports, both former and current SEC chairmen have stated that many cryptocurrencies may qualify as securities. Former SEC Chairman Jay Clayton actively opposed initial coin offerings (ICOs) in 2017, raising concerns that they could provide investors with significantly less protection than traditional markets, increasing the risks of fraud and manipulation.

Current SEC Chairman Gary Gensler has warned that cryptocurrency exchanges should register with the agency. Over the past year, the SEC has taken action against companies such as Coinbase and Kraken, accusing them of operating as unregistered exchanges, brokers, dealers and clearing houses. The SEC also filed a lawsuit against Binance in 2023 over similar allegations, alleging that the exchange defrauded customers and misdirected capital into investment funds owned by former CEO Changpeng Zhao.

The SEC has also recently turned its attention to non-fungible tokens (NFTs). The agency has filed charges against Los Angeles-based podcast studio Impact Theory for allegedly running an unregistered NFT offering. A month later, the SEC brought similar charges against NFT project Stoner Cats 2 LLC for conducting an unregistered NFT offering.

Lawmakers continue to work to develop laws to bring clarity to the regulation of cryptocurrencies and related assets.
Green Light for Spot Bitcoin ETFs
In early 2024, the SEC approved Bitcoin spot exchange-traded funds, a significant step for the crypto industry. The move comes years after brothers Cameron and Tyler Winklevoss first applied for a spot Bitcoin ETF in 2013.

The key moment leading to the SEC's final approval was a decisive decision made in the summer of 2023. The panel of judges then ordered the SEC to reconsider Grayscale Investments' proposal for a spot Bitcoin ETF.

Investment volumes as of May 23 in Bitcoin Spot ETF T. Source: Farside Investors

According to the court, it examined in detail the SEC's approach to Bitcoin spot ETFs and Bitcoin futures ETFs. In its proposal, Grayscale demonstrated that its Bitcoin ETF is similar to already approved Bitcoin futures ETFs in both underlying assets and co-monitoring agreements. The court said at the time that it should have “the same likelihood of detecting fraud or manipulative behavior in the Bitcoin and Bitcoin futures markets.”

The Securities and Exchange Commission (SEC) has approved 11 spot Bitcoin ETFs from companies including BlackRock and Fidelity. However, agency chairman Gary Gensler stressed that this does not mean the agency supports Bitcoin. The SEC's approval provided institutional and retail investors with the ability to access Bitcoin through more traditional investment channels, leading to billions of dollars inflowing into spot Bitcoin ETFs.

It is worth noting that the SEC has not yet approved any spot ETFs on Ethereum.
In conclusion, the SEC plays an important role in regulating the crypto market, protecting investors and maintaining market transparency. Recent decisions, such as the approval of spot Bitcoin ETFs, reflect the agency's efforts to adapt to new technologies.

But it is worth noting that the SEC's actions do not always take into account the opinion of the crypto industry, and sometimes their measures are perceived as too harsh. The approval of spot Bitcoin ETFs is a step forward, but further collaboration between regulators and the market is needed to create a balanced regulatory framework. Transparency, innovation and fair regulation remain key to the sustainable development of the financial ecosystem.

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