Banks vs. exchanges — Regulators overwhelmingly penalize fiat, not crypto

Published at: Sept. 3, 2021

While regulators have often targeted projects in and out of the crypto space, the fines levied against digital asset exchanges are a fraction of those against traditional financial institutions.

According to data from Good Jobs First’s violation tracker, the platform analyzed 50 of the biggest fines regulators levied against major banks, investment firms and brokers over the last 20 years. Bank of America accrued roughly $82 billion covering 251 different fines, including securities violations, while JPMorgan Chase and Citigroup have also been some of the most-fined banks in the United States since 2000, with penalties totaling $35.9 billion and $25.5 billion, respectively.

While both major banks and crypto exchanges have often been penalized for securities violations, data suggest that enforcement actions from U.S. regulators against those in the crypto space cost those firms less than 1% of that in traditional finance. Cointelegraph previously reported that from 2009 to early 2021, fines for crypto-related violations have totaled $2.5 billion in the U.S., while Good Jobs First’s data shows there were $332.9 billion in penalties from banks, investment firms and brokers in the last 20 years.

One of the largest actions came from the Securities and Exchange Commission against Telegram’s 2018 initial coin offering. The company was ordered to pay $1.2 billion in disgorgement and $18.5 million in civil penalties in 2020 after being charged for violating securities laws. In contrast, Bank of America was the target of the largest fine from the Department of Justice — $16.6 billion — for selling “toxic” mortgages related to the 2008 financial crisis.

In cases that involved the SEC, Commodity Futures Trading Commission and Financial Crimes Enforcement Network against crypto firms and individuals, unregistered securities offerings and fraud accounted for more than 90% of all fines. “Toxic securities abuses,” as Good Jobs First describes them, accounted for roughly 29% — $97 billion — of the $332.9 billion in total penalties. Investor protection violations came in second with $68 billion.

Though crypto firms continue to be the target of enforcement action by U.S. regulators — in August, BitMEX agreed to pay up to $100 million to resolve a case from the CFTC and FinCEN — there are signs lawmakers in the country are becoming increasingly aware of the economic impact of not having clear guidelines for innovative companies. Many U.S. senators and representatives have gotten behind proposals to amend language in an infrastructure bill going to the Senate this month. The legislation suggests implementing tighter rules on businesses handling cryptocurrencies and expanding reporting requirements for brokers.