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Crypto Crackdown: SEC Seeks More Funding, New Proposal To Ban Crypto Wallets

With the increased level of the crackdown, funding is crucial for the SEC to enforce cryptocurrencies and other financial products effectively.

On March 29, the U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler requested an additional budget of $2.4 billion, citing an increased effort to conduct investigations and bring legal actions to “misconduct.”

Part of the funding will be used to invest in “new tools, expertise, and resources” required to keep up with the fast-paced industry. Alternatively, the SEC plans to expand its enforcement team by adding 170 new members.

The SEC Wants to Grow

The agency’s Division of Enforcement is responsible for investigating and prosecuting violations of federal securities laws, including those related to cryptocurrencies.

In 2022, the agency reportedly handled “more than 35,000 separate tips, complaints, and referrals from whistleblowers and others.”

The SEC brought 750 enforcement actions upon processing these claims, with crypto-related cases accounting for 250 actions. The total value of crypto fines spiked in 2022 at $242 million, representing a 36% increase over the 22 actions announced in 2021.

The SEC’s request came after the agency alleged the Beaxy crypto exchange and its executives for conducting an unregistered securities offering. Beaxy had to shut down its operation in the U.S. following the charges.

The exchange’s founder, Artak Hamazaspyan, was also accused of illegally raising $8 million in an unregistered securities offering of the native token BXY.

The SEC claimed that Hamazaspian embezzled $900,000 in funds for personal use. The agency also brought charges against other executives, Nicholas Murphy and Randolph Bay Abbott.

The U.S. Securities and Exchange Commission (SEC) has become increasingly active in bringing cryptocurrency companies and individuals to justice. Over the last few months, several claims and notices have been filed against prominent names in the industry.

Some notable cases included crypto exchanges Kraken, Genisis, the issuer of Binance USD (BUSD) Paxos, TRON’s founder Justin Sun, and most recently, top crypto exchange Coinbase.

Unstoppable Moves

On Wednesday, Massachusetts Senator Elizabeth Warren reintroduced a proposal called the “Digital Assets Anti-Money Laundering Act” to ban crypto wallets.

  • The proposal debuted in December 2022, focusing on increased consumer protection by prohibiting digital asset mixers and tightening non-custodial wallets.
  • The proposed Digital Assets Anti-Money Laundering Act has sparked a heated debate in the crypto community.
  • While some argue that it is necessary to regulate the crypto industry to prevent illicit activities, others believe the proposed ban on crypto wallets is not the answer.
  • Critics of the bill argue that it is misguided and that banning crypto wallets would be ineffective in preventing money laundering and harm legitimate users who rely on non-custodial wallets for privacy and security reasons.
  • In response to the criticism, Senator Elizabeth Warren defended her proposal, stating that closing the loopholes that allow criminals to use crypto to launder money and finance illegal activities is necessary.
  • She argues that by banning crypto wallets, the government can prevent bad actors from hiding their identities and tracing the flow of funds, making it easier to catch criminals.
  • The proposed bill has also received criticism from industry leaders and organizations, including the Blockchain Association, who argue that it is too broad and could stifle innovation in the crypto industry.
  • They suggest that instead of a ban, the government should focus on implementing effective regulation that balances consumer protection with innovation.

No entity can escape the power of the laws. Proper regulations are required to protect the crypto users. At the same time, regulators are called to embrace the natural law of evolution. The unstoppable effort to crack down on the industry is a double-edged sword; it could kill innovation.

Clearly, the moves in the U.S. are anti-crypto, but they are not global in scope.

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