US SEC Prioritizes Crypto Compliance in 2020, But Hints at Kinder Gentler Approach

The United States Securities Exchange Commission continues to scrutinize crypto as its compliance office adds fintech and digital assets to its annual priorities list.

Per a Jan. 7 announcement from the SEC’s Office of Compliance Inspections and Examinations (OCIE), the agency has put new financial technologies including digital assets among major concerns in the coming fiscal year.

In the words of the regulator, new technological developments in capital formation and investment advice “warrant ongoing attention and review.”

The OCIE’s work

OCIE made a similar announcement at the beginning of 2019. At that time, however, the office said that:

“OCIE will continue to monitor the offer and sale, trading, and management of digital assets, and where the products are securities, examine for regulatory compliance.”

As the office responsible for investigating possibly illicit usage of securities, it makes sense that OCIE would be on the alert for compliance, but today’s announcement may suggest a sea change.

OCIE’s 2020 priorities for crypto differ from those of 2019 in that they seem more broadly interested in the positive potential of financial technologies. The office wrote that “OCIE also will continue to identify and examine SEC-registered firms engaged in the digital asset space” — maybe indicating a less retributive stance towards crypto in 2020.

The SEC in 2019

There is no doubt that the SEC has broadly stepped up its engagement with cryptocurrencies, particularly initial coin offerings (ICOs) that it determines to be unregistered securities offerings.

Famous examples of SEC actions against such ICOs include messenging apps Kik with its KIN token and Telegram with its GRAM offering, as well as its $24 million settlement with block.one over the EOS tokens native to its dApp platform.

Speaking with Cointelegraph last month, SEC Commissioner Hester Peirce expressed interest in promoting a more flexible regulatory approach to crypto offerings, including identifying offerings that don’t fall under the SEC’s purview. She said:

“The biggest thing the crypto community needs is a way to get from a securities offering to a utility token offering that is not covered by securities laws, or is not covered by the full panoply of the securities laws.”

Rise in crypto interest from U.S. government

The news is hardly surprising, given the broad rise in interactions between legal authorities and cryptocurrencies over 2019. Just this morning, crypto exchange Kraken reported a major rise in requests from law enforcement to investigate transactions on the exchange. Similarly, the Internal Revenue Service — the country’s tax authority — has been increasingly assertive in tracking cryptocurrency for taxation purposes.