Listen to the Article: U.S SEC Strikes Hard at Crypto Again, How Much Does It Rake in from Writing A Ticket?

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In early June, Fazzaco covered the story that the U.S. Securities and Exchange Commission (SEC) accused Binance and its founder Zhao Changpeng of secretly allowing high-value U.S. customers to continue trading on the platform despite a ban.

The day after Binance was targeted by the SEC, Coinbase also faced SEC charges​, alleging that it operated illegally without first registering with the regulator.

Earlier this year, crypto lending platform Nexo was also sued by the SEC and agreed to pay a $45 million fine to the SEC to settle the case, while also ceasing to offer unregistered crypto products to U.S. investors. The SEC's recent moves against the crypto community signal a tightening of regulation of cryptocurrencies. But can the regulator's actions deter the community itself? Will it affect the enthusiasm of crypto institutions to cooperate? Is the SEC using stricter crypto regulation to turn the community into its "cash cow"?

SEC: A U.S. Federal Agency, But Not Federally Funded

The U.S. Securities and Exchange Commission is the highest authority in charge of the country’s securities market, established under the Securities Exchange Act of 1934, and is an independent agency directly under the U.S. federal government. So, this institution is undoubtedly a federal agency. Unfortunately, the SEC is not federally funded, and its funds mainly come from fees paid by exchanges and brokers as required by the Treasury, which constitute a part of its budget.

In addition to the Treasury's OMB budget, the SEC has other sources of income: mainly transaction and application fees paid by securities traders as required, and "fines and disgorgement".

According to the SEC's 2022 financial statement, the regulator's total assets were $14.101 billion, up about 16% ($1.949 billion) from $12.152 billion in 2021. Of this, the "Investment - Disgorgement and Penalties Fund" item had assets worth of $2.826 billion, up $250 million from $2.576 billion in 2021; the "Accounts Receivable Net" of 2022 was $1.926 billion, up $1.523 billion from $403 million in 2021. The vast majority of these two items are made up of forfeiture income.

Enforcement and Examination Spent the Most while SEC's Forfeiture Income Hits A Record High in 2022

The regulator's 2022 financial statement also shows that among last year's total cost of about $2.7 billion, Enforcement and Examination accounted for the highest proportion, spending $1.283 billion and $472 million respectively. These expenditures paid for a total of 760 enforcement actions last year. And these 760 actions also brought in hefty returns: according to statistics, the SEC's total amount of disgorgement and penalties in 2022 was $6.439 billion (including civil penalties, disgorgement of proceeds, and pre-judgment interest), setting a record for the agency, almost twice as much as $3.852 billion in fiscal year 2021.

According to DeFi analyst Loki Zeng's view, the SEC's style of action is actually a kind of "ex post facto enforcement": that is, to let as many people as possible enter the financial market and make actions first, and then the regulator will investigate and collect evidence as much as possible, prosecute and issue fines.

Conclusion

Now, let's get back to the action against the crypto community, although the SEC chairman said in February this year that almost all types of crypto transactions except Bitcoin fall within the scope of securities transactions under SEC jurisdiction, but because the nature of crypto transactions has not been clearly defined in the United States for a long time, so in fact SEC's attitude towards crypto assets is in a state of fluctuation, full of subjectivity and flexibility, which is what the market does not want to see.

On the other hand, because crypto transactions belong to an emerging field, therefore its regulation is a continuous evolving process that requires some time to make the rules of the game gradually clear.