The cryptocurrency space has seen several unprecedented regulatory issues in 2024, with the U.S. Securities and Exchange Commission (SEC) taking in a whopping $4.68 billion in fines against cryptocurrency companies. This is a record-breaking and history-making figure which not only signals the previous year’s penalties but also signals a serious shift in the regulatory aspect for cryptocurrencies.
As the cryptocurrency market continues to grow and develop, the SEC’s regulatory enforcement actions will reshape the cryptocurrency industry and force enterprises to reassess their plans and strategies beforehand.
What is SEC?
The Security and Exchange Commission is an independent federal agency which is responsible for protecting investors, proper marketing and facilitating capital formation. SEC was established in the year 1934 during the Great Depression.
The main aim of the SEC is to enforce federal security laws and regulate the security industry along with the stock and options exchanges.
In the past years, the SEC has become very active in regulating the cryptocurrency space. It says that many digital assets qualify as securities which makes them fall under their jurisdiction. This approach has led them into multiple legal issues with other cryptocurrency companies, shaping the regulatory framework.
The 2024 enforcement by SEC
The $4.68 billion fine which was imposed by the SEC in this year 2024 shows a 3,018% increase in penalty fines as compared to the previous year. This sudden and shocking increase in the number of penalties reflects the agency’s serious and strict focus on the cryptocurrency industry and its determination to bring the whole industry under proper regulatory control.
Do Kwon, a co-founder of Terraform Labs, and the company were the targets of a single lawsuit that contributed the majority of the 2024 fine.
The $4.68 billion penalty was imposed for offering unregistered securities and misleading investors about the stability of their cryptocurrency. This case was backed by the collapse of the terraUSD algorithm stablecoin of Terraform Labs.
It serves as a warning to other cryptocurrency companies to follow all the regulations without any misunderstanding.
Major fines imposed by the SEC
Terraform Labs and Do Kwon – $4.68 billion (2024)
- This is one of the largest fines in the SEC crypto regulatory enforcement history
- It accounted for nearly 100% of the total fines of 2024.
Telergam – $1.24 billion (2019)
Ripple – $125 million (2021)
Reason for fine on Terraform Labs by SEC
Here are the main reasons why SEC fined the Terraform Labs and Do Kwon:
- Misleading the investors: Terraform Labs was found deceiving the investors about the security and value of the digital assets it was providing them mainly used in the TerraUSD algorithm stablecoin.
- Unregistered securities: The main reason why the SEC accused Terraform Labs was that it offered cryptocurrency assets which were not registered.
- Failure to comply with laws: The SEC stated that many of Terraform’s cryptocurrency assets which were called securities should have been regulated through them.
Evolution of SEC enforcement
The SEC’s lookout for cryptocurrency regulations changed a lot since 2013 when it began overseeing the crypto space. In the initial years, the penalties were low with just $40.7 million fines imposed in 2013.
However, as the cryptocurrency market developed and initial coin offerings became more popular, the SEC also worked on its regulatory enforcement.
A notable shift was seen in 2018 when the SEC agency began imposing a large number of fines on crypto firms. By 2019, the average fine had increased largely due to a $1.2 billion penalty against Telegram’s cryptocurrency project called TON.
Then this whole trend became prevalent and continued under the leadership of SEC chairperson Gart Gensler.
Also, Read: UK Crypto Regulations 2024: What You Need to Know
Impact of SEC’s regulatory enforcement on the crypto industry
The SEC’s strict regulation enforcement actions have sent waves of concern among the crypto industry. Many digital asset companies have now assessed their way of working and strategies to avoid penalties from the SEC.
The increased attention has led to more serious planning for proper token launch events and more emphasis on trading regulations.
The ongoing legal cases between SEC and the other cryptocurrency firms like Ripple and Coinbase show the seriousness of regulations in the whole crypto market.
