Gurbir Grewal, the head of enforcement at the United States Securities and Exchange Commission (SEC), has responded to criticism that the regulator is creating rules on cryptocurrency as it goes along.
During an SEC Speaks event on April 3, Grewal stated that companies in the crypto industry have made various attempts to avoid the SEC’s jurisdiction by continuing to operate in the US. He also addressed concerns that the SEC is exceeding its authority or regulating through enforcement in lawsuits against crypto firms.
Grewal used the case of Sam Bankman-Fried as an example of the need for enforcement cases. Bankman-Fried, the former CEO of FTX, was recently sentenced to 25 years in federal prison for defrauding investors of the crypto exchange. Grewal expressed his hope that the SEC’s authority to regulate the crypto markets would be affirmed, allowing them to focus on the real issues in the industry such as fraud, lack of transparency, and conflicts of interest.
Grewal emphasized that the SEC’s standard for determining whether a security is a security under the Howey test has been consistently applied. However, he did not directly address reports that the SEC is considering classifying Ether (ETH) as a security instead of a commodity.
Grewal pointed out that the SEC’s analyses are public documents and not secret, and that even parties arguing in court have used the Howey framework to evaluate crypto offerings internally.
In March, a judge in Utah imposed sanctions on the SEC for acting in bad faith in a lawsuit against Debt Box. This has led many in the industry to criticize the SEC’s inconsistent approach to enforcement on crypto firms and exchange-traded funds, raising concerns of a potential exodus from the US.
Grewal’s comments came after SEC Commissioner Hester Peirce criticized the regulator’s accounting guidelines for institutions holding crypto assets. Peirce and other staff and commissioners are speaking at the SEC Speaks event, which ends on April 3.