More War? SEC Adds Crypto to Examination Priorities

The U.S. regulatory agency has earmarked the digital asset industry for further scrutiny in the coming year.

The United States Securities and Exchange Commission (SEC) may not be done with its ongoing clampdown against the digital asset industry. Earlier this week, the regulatory body published its examination priorities for the coming fiscal year, mentioning the emerging crypto space as one area where it would focus its regulatory efforts.

The newly released SEC’s examination priorities document covers the 2024 fiscal year, which begins October 1, 2023. In a section dedicated to the agency’s planned efforts for the digital assets industry, the SEC notes that it has observed “the proliferation of certain types of investments, including crypto assets,” and the continued volatility surrounding the nascent asset class.

Hence, the SEC’s Division of Examinations will, during the fiscal year, carry out ongoing checks on crypto-related companies registered with the agency. The checks will seek to ensure that companies implement and follow recommended conduct for entities that provide crypto-investment products or services to clients. 

Specifically, the agency will ensure that such entities provide clients and retail customers with an ongoing understanding of the products they are investing in. The SEC also plans to ensure that registered crypto companies meet compliance standards in relation to areas such as risk disclosure and resiliency practices.

Lastly, the SEC also signaled its intent to assess how companies under its purview address the technological risks associated with the adoption of blockchain and distributed ledger technologies.”

SEC Pushes “Crypto Asset Securities” Narrative Under New Examination Priorities

The recently published SEC examination priorities reveal the agency’s controversial stance to label cryptocurrencies as securities. In two sections of the recently published document, the SEC addressed cryptocurrencies as “crypto asset securities,” subtly pushing the narrative into mainstream consciousness.

However, the legal status of cryptocurrencies remains a debatable issue, as evidenced by Ripple’s recent win against the SEC after a three-year-long tussle. Other outstanding lawsuits against Coinbase and Binance also hinge on the same issue, which may ultimately be decided by a Congressional ruling.