Head of SEC’s Division of Encrypted Assets and Network More Charges to be Filed Against Exchanges and DeFi

SEC's Division of Encrypted Assets plans to file more charges against exchanges and DeFi.

Author: Jesse Hamilton, CoinDesk; Translation: Song Xue, LianGuai

• The regulators of this regulatory agency widely assert that the U.S. Securities and Exchange Commission (SEC) is more prepared for the cryptocurrency industry.

• However, David Hirsch acknowledges that the agency currently has a heavy litigation burden and cannot pursue everything.

David Hirsch, head of the SEC’s Division of Enforcement for Cryptocurrency Assets and Network, said that the SEC has not yet finished its investigations into cryptocurrency exchanges and decentralized finance (DeFi) projects, and the SEC believes that these projects, like Coinbase Inc. (COIN) and Binance, have violated securities laws.

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Hirsch stated on Tuesday at the Central Securities Enforcement Forum in Chicago that his enforcement office has been filing lawsuits at a very different pace than the SEC.

“We will continue to bring these charges,” he said, adding that the regulatory agency is also focusing on many other businesses that operate similarly to Coinbase and Binance. His office has been involved in many complex cryptocurrency cases in federal courts and, judging by the recent effort to appeal the Ripple ruling, has not always been completely successful.

Hirsch stated that the SEC’s interest in cryptocurrencies goes beyond well-known exchanges.

“We will continue to actively act as intermediaries,” he said. “This could be brokers, dealers, exchanges, clearinghouses, or anyone else active in this space who is within our jurisdiction and is either unregistered or has failed to provide adequate or complete disclosures.”

Hirsch also stated that DeFi projects will not escape the attention of the enforcement division.

“We will continue to investigate, and we will be active in this space. The label of DeFi will not stop our work,” he said.

The U.S. securities regulatory agency has traditionally taken a relatively cautious approach to enforcement, targeting regulated firms (typically large Wall Street companies with extensive legal departments) for misconduct, which often quickly results in negotiations and settlements. However, because charges against digital asset companies often threaten their survival, they tend to take the agency to court.

The enforcement budget of the SEC is limited. “We do have a lot of litigation going on,” Hirsch admitted.

Hirsch acknowledges that the SEC can only do so much.

“The number of existing tokens—I think it’s probably 20,000 or 25,000, the last time I read— is more than the SEC or any agency has the resources to directly pursue, and likewise, there are many centralized platforms, some of which act as unregistered exchanges,” he said.

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