Author: flowie, ChainCatcher
Recently, US regulatory agencies seem to be rushing to meet performance targets for the soon-to-end 2024 fiscal year, increasing the intensity of their regulatory enforcement in the crypto sector.
Last week, according to a report in The Wall Street Journal, the federal government is investigating the crypto currency company Tether for possible violations of sanctions and anti-money laundering regulations. Although denied by Tether, this has caused some market panic.
Throughout October, the SEC has charged at least 20 crypto projects and individuals, including Cumberland, Gotbit, CLS, ZM Quant, Saitama and Robo Inu, seizing over $25 million in crypto assets. Many of these charges were made in conjunction with the FBI and DOJ, with crypto market makers and crypto trading firms that are closer to the money also becoming a focus of the crackdown.
With US regulatory agencies not slowing down their crypto scrutiny, the crypto settlement record in 2024 may reach a new high.
Crypto settlements near $20 billion in 2024, setting a new high, with industry leaders as the focus of the crackdown
2024 has been a year of surging crypto enforcement by US regulators. According to Coingecko data, as of October 9th, crypto enforcement settlements by US regulators have reached nearly $20 billion in 2024, up 78.9% from 2023 and accounting for two-thirds of the total settlement amount over the past 5 years. Given that 2024 is not yet over, and regulatory agencies are still not slowing down their actions, this year's crypto litigation and settlement record is expected to exceed 2023.
Looking at the SEC alone, according to a report updated by social capital markets on October 19th, the SEC's fines on the crypto sector in 2024 reached $4.68 billion. Since 2013, the SEC has only imposed a total of $7.42 billion in fines on crypto companies and individuals, meaning that 63% of the fines were concentrated in 2024.
The fine amount in 2024 is 3018% higher than the $150.26 million in 2023.
Although the fine amount has increased further, the number of incidents is decreasing. The SEC's crypto enforcement actions in 2024 were only 11 cases, far fewer than the 30 cases in 2023.
The SEC's crypto enforcement strategy has clearly been adjusted, focusing on representative cases and taking more impactful enforcement actions (such as higher fines and more aggressive publicity), setting industry precedents.
The SEC's huge fines this year were mainly contributed by Terra and its co-founder Do Kwon, which also set a precedent for the SEC's crypto enforcement.
This year, in addition to Terra, the industry leaders across the crypto sectors have also fallen victim to SEC regulatory lawsuits.
In April, the DeFi leader Uniswap Labs and ConsenSys received Wells Notices from the SEC, alleging that their products violated securities laws and were not registered as brokers, and also participated in the issuance and sale of some unregistered securities. ConsenSys was officially sued by the SEC on June 28th.
On August 28th, the NFT market leader OpenSea and the top crypto exchange Crypto.com also received Wells Notices, alleging that the NFTs or tokens traded on their platforms may be considered unregistered securities.
In October, the SEC also joined forces with the FBI and DOJ to enforce and crack down on the meme market maker Gotbit, and charged the top market maker Cumberland for violating securities laws.
Just as the market is guessing who the next regulatory target will be, Fox Business reporter Eleanor Terrett recently said on the X platform that in 2024, no major crypto participants registered with the SEC, but the commission still included crypto currencies in its 2025 review focus list.
Terrett speculates that "the SEC's regulatory (rather than enforcement) interactions have been limited to just Bitcoin and Ethereum ETFs. Will the review focus on these ETFs and the companies they work with?"
According to a Wall Street Journal report, the US Treasury Department has also set its sights on the largest stablecoin issuer Tether.
Oppressive regulation is a catalyst for MEME, Trump's return to power is bad news for MEME?
Castle Island Ventures co-founder Nic Carter said on his social platform that the MEME coin craze is largely a reaction to the SEC's oppressive regulation. If the SEC regulates rationally, the market demand for trading MEME coins will decrease.
Crypto KOL @WutalkWu also believes that one regulatory reason for the MEME boom is that the SEC does not allow coin issuers to give value to the tokens, otherwise they would be considered registered securities.
He said that under such regulatory conditions, many VC tokens have become MEME coins. VC investments that should have been equity investments, revenue sharing, and long-term tracking have turned into treating the project as a MEME to be speculated on.
But if Trump is elected, the situation may change. Overseas crypto KOL @malekanoms analyzed that Trump's victory will have a negative impact on MEME.
@malekanoms believes that a Republican landslide will overturn all this, restore Initial Coin Offerings (ICOs), enable universal airdrops, and other forms of token rationalization. They may also make fee conversion and token dividends possible. And the US's rational regulation will refocus the crypto currency's attention on dApps and other truly important things, but may also lead to a long-term bear market.
Increased regulation raises operating costs for companies, hiring government officials becomes a trend
In order to avoid the huge operating costs of fines as much as possible, hiring government officials has become a trend for crypto companies.
The FOX reporter stated that this year the SEC's "revolving door" phenomenon has been particularly prominent, with many well-known officials leaving office to join private companies.
- Carolyn Welshhans, former acting head of the Crypto Assets and Cyber Unit, has joined Morgan Lewis, focusing on securities enforcement matters.
- Former Enforcement Division Director Gurbir Grewal has joined Milbank Law as a partner, and the firm is currently representing clients like Binance in SEC lawsuits, which were initiated during Grewal's tenure.
- Former head of the Crypto Assets and Cyber Unit David Hirsch has joined McGuireWoods LLP, providing advisory services on crypto-related matters and cybersecurity regulations for clients.
- Ladan Stewart, who previously brought lawsuits against Coinbase and Ripple for the SEC, has also joined White & Case to help clients deal with SEC enforcement actions in areas like crypto.
In addition to hiring officials, Uniswap's launch of Unichain is to some extent a means of dealing with regulation. Crypto KOL @_FORAB believes that subsequent DeFi projects with native token staking rewards should all follow Uniswap's example and launch their own application chains to avoid the securities-related regulatory issues. "After all, the cost of running a standalone chain is far less than paying fines to the SEC."
As Gary Gensler's term ends, will crypto regulation see a spring?
In a few days, the 2024 US presidential election will come to a close. Whether Trump or Harris wins, SEC Chairman Gary Gensler is likely to step down early, as his term was originally set to expire on January 5, 2026.
But Trump clearly stated at a Bitcoin conference in July this year that he would fire Gensler, and the Harris team has already met with crypto industry insiders, privately indicating that they will reset industry relations.
US Congressman French Hill (R-AR) told the Thinking Crypto podcast that the SEC should have new leadership next year, regardless of which party controls the White House.
Ripple Labs CEO Brad Garlinghouse also predicted that Gensler will step down after the upcoming presidential election, regardless of the outcome.
According to a CNBC report, potential successors to Gensler include J. Christopher Giancarlo and Heath Tarbert, the two Commodity Futures Trading Commission (CFTC) chairs during Trump's first term, Dan Gallagher, the current Robinhood Chief Legal Officer who has served two terms as an SEC commissioner, and Paul Atkins, who served as an SEC commissioner under the Bush administration.
Based on their past statements or regulatory attitudes during their tenures, they are almost all more crypto-friendly compared to Gensler.
In addition to expecting a more lenient attitude from the US regulatory authorities, crypto enterprises need a clear regulatory framework. Rather than spending a lot of resources trying to avoid prosecution, crypto enterprises may be more eager to focus on building under clearer rules.
ConsenSys sent an open letter to the future US president last week, calling for the establishment of clear and supportive regulations for cryptocurrencies and Web3.
SEC Commissioner Mark T. Uyeda also recently pointed out that countries in the Asia-Pacific region such as Japan, Singapore, and Hong Kong have already established clear frameworks that support innovation while protecting investors, whereas the lack of clear guidance in the US has led to uncertainty for market participants. He will urge the US to take a more proactive approach to crypto regulation.
