Regulators Seek Crypto Blood, They Shatter Annual Record With 58 Legal Actions

Posted on January 31, 2023
News
By Mark Otto
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In the last year, many have claimed the crypto industry is under attack by U.S. regulators and recent data supports this perception. The agencies in this country shattered all previous records, since 2013, in terms of legal actions against companies in the nascent space. Related Reading: New Features in Coinbase Crypto Wallet Protects Users […][...]

According to data shared by Solidus Labs, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Financial Crimes Enforcement Network (FinCEN) took a total of 58 enforcement actions against crypto projects.

Crypto v The U.S., A New Normal?

As seen in the chart above, these 58 legal actions have been the highest for almost a decade. They represent a 65% increase from 2021 and around 60% from 2020.

The SEC has been crypto’s biggest opposer over the past decade. In 2022, the Commission announced 30 actions against projects and companies in the sector. The agency seems to be operating under a “regulation by enforcement” approach to the detriment of the nascent industry.

The SEC opened and won cases against the peer-to-peer digital marketplace LBRY, and payment company Ripple, to name a few. The latter of these cases is still ongoing while the Commission attempts to gain more jurisdiction over the digital asset industry.

The SEC is not the only U.S. regulator after crypto projects. The CFTC has been increasing its legal action against the sector and recorded 19 cases in 2022. This represents a 73% increase from its 2021 high, suggesting an upward trend in legal cases filed against the nascent industry.

The FinCEN saw a minor increment, but its action against the Ethereum-based decentralized exchange (DEX), Tornado Cash, had a significant impact. The agency added the protocol to its list of sanctioned entities crossing a line between companies/individuals and technologies. The repercussions of these sanctions continue to ripple across the industry.

Which Agency Hit Crypto The Hardest?

The spike in regulations against crypto originated in the collapse of major entities within the space. In 2022, the Terra (formerly LUNA) ecosystem collapsed, leading to the bankruptcy of several companies, including hedge fund Three Arrows Capital (3AC).

Later, the collapse of the crypto exchange FTX and the misappropriation of billions in customer deposits appear to have sent another message to regulators. In the U.S., Federal and State agencies joined forces to retaliate against the nascent industry.

In this context, regulators captured over $3.5 billion in fines. According to the report, the SEC and the CFTC issued most of these penalties. The chart below shows that the SEC issued over $2 billion in fines from 2013 to 2022.