Regulation by Enforcement Continues to be the SEC Strategy for Crypto

Key Insights

• The SEC continues to regulate by enforcement in the absence of digital asset legislation. Industry actors disagree if there are sufficient rules and forms to cooperate with regulators intelligently.
• Economic data continues to point toward a more persistant inflationary pressures than the Fed would like. Two more hikes in the first half of 2022 is now the base case.
• Silvergate attracted interest from a number of notable buyers, despite being the most shorted stock across U.S. equity markets.

The U.S. Securities and Exchange Commission continues to regulate by enforcement in the absence of digital asset legislation

Over the last week, the U.S. Securities and Exchange Commission (SEC) has taken two significant actions related to digital assets. These actions follow last month’s charges against Genesis and Gemini for the unregistered offer and sale of crypto asset securities through the Gemini Earn lending program.

The first action took place on February 9, when the SEC charged Payward Ventures, Inc. and Payward Trading Ltd. (both commonly known as Kraken) with “failing to register the offer and sale of their crypto asset staking-as-a-service program.” The Kraken entities settled with the SEC by paying $30 million and immediately ceasing to offer or sell securities through crypto asset staking services or staking programs in the U.S. Additionally, without admitting to or denying the allegations in the SEC’s complaint, Kraken consented to permanently stop staking operations in the U.S., subject to court approval.