- The SEC will not offer amnesty to crypto companies that self-report securities violations, its enforcement director told Reuters.
- Gurbir Grewal said companies that admit violations may get certain benefits like lesser penalties from the SEC.
- The comments come as the SEC aims to toughen its crypto market oversight under Chair Gary Gensler.
Crypto companies that voluntarily report their breaches of securities laws shouldn't expect the Securities and Exchange Commission to grant them an amnesty in return, SEC enforcement director Gurbir Grewal told Reuters.
"Our message to them is not, 'Register your product, and we'll just ignore the billions you have under management in this crypto lending product and your violations of the securities laws,'" Grewal said, according to a Reuters report Monday.
But self-reporting companies might get a lighter penalty for their violations and other help, Grewal added.
"Our message is that we'll view their conduct more favorably if they come in — such as what the remedies will look like, including penalties, and finding a path to complying with the securities laws," he said.
The official's comments provide more clarity for crypto market participants about the SEC's likely regulatory framework, which analysts and industry leaders see as key to encouraging institutional investors into digital assets.
Crypto regulation is at the top of the SEC's agenda, and a crackdown on digital assets is a key focus for it this year under Chair Gary Gensler, an expert on blockchain and a fierce proponent of regulating the industry.
"If the trading platforms don't come into the regulated space, it'd be another year of the public being vulnerable," Gensler said in January.
He has previously said the crypto market does not offer enough investor protection and compared it to the Wild West.
Currently, crypto exchanges in the US don't have a regulator that directly oversees the market's activity. The US, the UK, and the EU are among several regulators worldwide seeking to develop a regulatory framework for digital assets.
Some in the crypto industry were encouraged by the SEC's recent settlement with cryptocurrency firm BlockFi to hope the securities regulator might consider giving amnesty to companies self-reporting violations, according to Reuters.
Earlier in February, BlockFi Lending agreed to pay $100 million to settle the SEC charges that it failed to properly register its services. The regulator said its BlockFi interest-bearing accounts were unregistered securities offerings, and it failed to register as a money manager.