Increased Enforcement and Regulation of Crypto

Cryptocurrency has been at the forefront of debate between various law enforcement and regulatory efforts to impose stricter controls and regulations and those who view it as a form of currency that should not be closely regulated. Within the past two weeks, both the SEC and the Treasury Department have defended their enforcement actions and requested additional tools to combat cryptocurrency fraud and misuse.

The SEC again defended its authority to regulate crypto, despite critics claiming that cryptocurrency is a commodity not an SEC regulated security. At the SEC Speaks in 2024 event, Enforcement Chief Gurbir Grewal maintained that the SEC’s enforcement actions have been consistent and principled, tied to federal securities laws and court precedents. The SEC’s position is that if a crypto asset was offered and sold as an investment contract, it’s a security under the Howey test. The SEC rejects the argument that crypto products are currencies and beyond the reach of SEC regulation. To date, various courts have upheld the SEC’s position.

The Treasury Department has once again called on Congress for additional tools to combat cryptocurrency use by terrorist organizations who circumvent restrictions and embargoes to gain access to funds. One of the recent requests was to introduce secondary sanctions that would allow the Treasury Department to target digital asset providers, even extraterritorially. Included in the various requests was extra funding for the Office of Foreign Assets Control.

A number of Senators support strong anti-money laundering restrictions on cryptocurrency. Many in the crypto sector do not comply with know your customer, documentation of account holders, source of assets and other anti-money laundering measures. Other Senators want only a “light regulatory system” that imposes restrictions on centralized retail crypto exchanges to bring crypto out of the “Wild West”.

Clearly, cryptocurrencies will continue to be subject to increasing regulations and enforcement as Congress and regulatory agencies understand the nuances and complexities of ever developing and expanding platforms.

Stahl Gasiorowski Criminal Defense Attorneys are experienced in defending individuals charged with various crypto related offenses, including wire fraud, money laundering, unregistered currency exchange and securities fraud. To contact us call 908.301.9001 for the NJ office and 212.755.3300 for the NYC office, or email Mr. Stahl at rgs@sgdefenselaw.com or Laura K. Gasiorowski at lkg@sgdefenselaw.com