Digital Assets: SEC Prioritizes Fraud Over Broad Crypto Enforcement (Part III)

SEC Launches Crypto Task Force Led by Commissioner Peirce

On January 21, 2025, the SEC issued a press release, announcing the launch of a crypto task force, led by Commissioner Hester Peirce, aimed at developing a comprehensive and clear regulatory framework for digital assets. According to the release, the task force is to draw “clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously”. The SEC acknowledged that it’s prior reliance on enforcement actions to regulate digital assets led to “confusion about what is legal, which creates an environment hostile to innovation and conducive to fraud.”

SEC Replaces Crypto Unit with CETU to Combat Emerging Tech Fraud

On February 20, 2025, the SEC announced the launch of the Cyber and Emerging Technologies Unit (“CETU”), which replaces the Crypto Assets and Cyber Unit and focuses on fraud in emerging technologies such as artificial intelligence and machine learning; social media, dark web, or false websites; hacking to obtain material nonpublic information; takeovers of retail brokerage accounts; blockchain and digital assets; regulated entities’ compliance with cybersecurity rules and regulations; and public issuer fraudulent disclosure relating to cybersecurity.

SEC Drops Enforcement Actions Against Major Crypto Exchanges

Shortly after CETU’s creation, the SEC informed Robinhood Crypto that it would not proceed with an enforcement action and announced the dismissal of enforcement action against Coinbase. The SEC subsequently filed to dismiss three enforcement actions against Payward, Inc. and Payward Ventures, Inc. (d/b/a “Kraken”), Consensys Software Inc., and Cumber DRW LLC; stating that the “decision to exercise its discretion and dismiss this pending enforcement action rests on its judgment that the dismissal will facilitate the Commission’s ongoing efforts to reform and renew its regulatory approach to the crypto industry, not on any assessment of the merits of the claims alleged in the action.”

A Shift in SEC Crypto Enforcement Priorities

The launch of CETU, coupled with the dismissal of enforcement actions against some of the largest cryptocurrency exchanges, signals a shift in agency priorities. The SEC appears to be reallocating resources toward combating fraud in high-risk emerging technologies and away from the broad application of enforcement tools in areas that are undergoing regulatory development.

CXG’s Support for Broker-Dealers Amid Regulatory Change

As rules, regulations, and changes continue to be developed, Compliance Exchange Group continues to analyze the latest news to assist in buying, selling, building Broker-Dealers, providing guidance for Broker-Dealer registration, principal outsourcing, and full-service compliance solutions for Broker-Dealers.