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SEC – budget 2024
Yesterday, Securities Exchange Commission (SEC) Chair Gary Gensler testified about his agency’s budget for 2024 in front of the House Appropriations Subcommittee on Financial Services and General Government.
The Chair indicated in his prepared testimony that his agency will need 170 additional full-time “equivalents” for 2024 which will bring the SEC’s total employee base to approximately 5,139 FTEs.
As for crypto, “rapid technological innovation in the financial markets has led to misconduct in emerging and new areas, not least in the crypto space. Addressing this requires new tools, expertise, and resources” and translates into 1,434 total FTEs in the enforcement division alone for 2024.
SEC – enforcement business
Gensler also said in his prepared testimony that 750 enforcement actions in FY 2022 resulted in $6.4 billion in penalties and disgorgement.
With 1,311 FTEs in enforcement in 2022, each SEC employee generated about $4.8 million. That’s a good business.
Tip: To give a sense of crypto’s relatively diminutive scale versus TradFi and the SEC’s enforcement team which is generating $6.4 billion a year, Aave is the largest DeFi lending market by Total Value Locked (TVL) at ~$8 billion according to FS Insight.
During yesterday’s House Financial Services hearing titled, “The Federal Regulators’ Response to Recent Bank Failures,” Treasury’s Under Secretary for Domestic Finance, Nellie Liang, told lawmakers, “I don’t believe that crypto played a direct role in either of the failures.” Read more on CoinDesk.
- See the 5.5 hour, hearing video here – YouTube
- House lawmakers roast regulators over failed banks – The Hill
hill staffer hire
Landon Zinda, who was most recently counsel to the Senate Banking Committee and its now-retired Ranking Member Senator Pat Toomey (R, PA), announced in a thread on Twitter that he’s joined crypto advocacy firm CoinCenter as Policy Council.
“As Policy Counsel, I’ll be working to educate more Members of Congress about truly free and open cryptocurrency networks.”
“In addition to Members, I think the public often overlooks just how much influence those working for Members of Congress can have.”
“Staff advise Members on specific topics on a daily basis when Members have a larger responsibility and need to cover a wide variety of topics; from national security, to energy, to the economy, and many others. Staff make sure Members are up to speed on the details of each topic.”
“[CoinCenter] has been the thought leaders for years on crypto policy in Washington, DC. We still have a lot of work to do, and I’m excited to join this amazing team.”
Zinda worked for 5+ years for House Majority Leader Tom Emmer (R, MN) before joining up with Sen. Toomey.
Binance and China
An article in the Financial Times yesterday says that China may have been more involved in Binance than previously thought. Binance CEO Changpeng “CZ” Zhao and other senior managers “instructed Binance employees to hide the company’s Chinese presence. This included an office in use until at least the end of 2019, and one Chinese bank that was used to pay some employee salaries. ‘We no longer publish our office addresses… people in China can directly say that our office is not in China,’ Zhao said in a company messaging group in November 2017, seen by the FT.” Later in the article it is stated that many of the company’s developers were still thought to be in China. Read more (subscription).
The revelation further complicates matters for Binance who denied just last year any significant China presence and was charged on Monday for deceptive practices related to derivative products by the Commodity Futures Trading Commission (CFTC).
With Congress in recess next week, you may want to head to New York City for blockchain analytics firm Chainalysis’ Links 2023 conference on April 4-5. Headliners include New York Department of Financial Services Superintendent Adrienne Harris and CFTC Commissioner Christy Goldsmith Romero. In a timely conversation, Chainalysis co-founder and Chief Strategy Officer Jonathan Levin is scheduled to talk to Binance’s new Global Chief Compliance Officer Noah Perlman. See more.
latest enforcement action
The SEC announced that is has charged crypto asset platform Beaxy and its executives “for failing to register as a national securities exchange, broker, and clearing agency.” The Beaxy token (BXY) is also caught up in this action as an unregistered securities often. Read:
Finally, the SEC also “charged market makers operating on the Beaxy Platform as unregistered dealers” – this last part might be the most significant new strategy by the SEC. Mike Selig, counsel at Willkie Farr & Gallagher, tweeted:
“SEC is incrementally building a body of legal theories to target crypto asset intermediaries. It’s not only focused exchanges. Beaxy complaint shows SEC is scrutinizing market making arrangements as broker-dealer activity and certain custody arrangements as clearing activity.”
Meanwhile, on the Beaxy website, the company announced a “suspension of service” saying, “Regrettably, we are announcing the immediate suspension of services on Beaxy Exchange. Due to the uncertain regulatory environment surrounding our business, we have made the difficult decision to cease operations.”
In spite of the flood of fraud and enforcement actions in the crypto world, Blockchain startup Fetch.ai has received $40 million in new funding. TechCrunch’s Ingrid Lunden reports, “The startup, based out of Cambridge, England, says it is building tooling that focuses on ‘autonomous agents, network infrastructure, and decentralised machine learning’ that help enable communication and actions between AI applications, the idea being to make the work produced by them more actionable.” Read more.
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