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Report: SEC finds cryptocurrency exchanges to be selling coins that are illegal


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    U.S. cryptocurrency exchanges list more than a dozen digital coins outlawed by regulators.

    That’s according to a Monday (May 8) Wall Street Journal (WSJ) report, which also notes that the number of cryptocurrencies labeled by the Securities and Exchange Commission (SEC) has nearly tripled last year.

    The SEC can only regulate digital coins classified as securities, the report says, and SEC Chairman Gary Gensler has said most cryptocurrencies are part of that designation.

    According to the report, that means many of these tokens were distributed illegally, as securities can only be sold to the public after they’re registered with the SEC and issuers put forth financial and risk disclosures.

    Since late 2017, the SEC Securities and Exchange Commission and U.S. courts have identified 76 cryptocurrencies as securities. Of those 76, 16 were available for trading on one or more major U.S. crypto exchanges, the WSJ said.

    The report comes amid an ongoing clash between the SEC and crypto companies, who complain that the U.S. lags behind other countries in digital asset rules.

    Among them is Ripple CEO Brad Garlinghouse, who told CNBC at the Dubai Fintech Summit on Monday (May 8) that the U.S. is being overshadowed by other countries in this area.

    He added that by the time an SEC lawsuit filed against Ripple in December 2020 is resolved, the company will have spent $200 million defending itself.

    “I find it — as a company that started in the United States, as someone who is a U.S. citizen — it’s sad, like I have sadness about this,” Garlinghouse said. “The U.S. is getting passed, not just a little bit, but by a lot.”

    The UAE has the Virtual Asset Regulatory Authority and the European Union has the Markets in Crypto Assets (MiCA), but the U.S. has put “politics ahead of policy,” he said.

    Meanwhile, PYMNTS reported last week that the SEC has upped its enforcement against crypto companies under Gensler’s leadership.

    In 2022, the agency brought a total of 30 cryptocurrency-related enforcement actions, a 50% increase from the prior year. And in the first months of 2023, the SEC has handed out 13 enforcement actions, on pace for an increase of more than 25% over last year’s numbers.

    “Along with shifting the focus from individual tokens to trading platforms that cater to U.S. investors, Gensler has separately increased the number of enforcement attorneys in the SEC’s crypto unit — a move that observers say indicates the SEC chair intends to execute further charges in the coming months as his agency casts as wide a net as possible,” PYMNTS wrote.

    Sources


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