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The US Securities and Exchange Commission (SEC) has announced the creation of a new unit that will focus on tackling cyber threats and protecting retail investors in the emerging technologies space.
The SEC’s new Cyber and Emerging Technologies Unit (CETU) will replace the Crypto Assets and Cyber Unit with immediate effect.
It will be led by Laura D’Allaird, former co-chief of the Crypto Assets and Cyber Unit and former counsel to the Biden-era SEC commissioner, Jaime Lizárraga.
Mark Uyeda, acting chair of the SEC, said the new unit will have a dual function of protecting investors while supporting innovation.
“The unit will not only protect investors but will also facilitate capital formation and market efficiency by clearing the way for innovation to grow,” he said.
“It will root out those seeking to misuse innovation to harm investors and diminish confidence in new technologies.”
Uyeda added that the new unit is expected to marshall SEC resources more "judiciously" towards enforcement actions involving emerging technologies.
Examples of priority target areas include securities fraud committed using AI, machine learning, blockchain and crypto-assets.
The unit will also target the use of social media, the dark web and false websites to perpetrate fraud, and the hacking of material non-public information.
Finally, regulated entities’ compliance with cybersecurity rules and regulations will be a key target for enforcement, alongside fraudulent disclosures relating to cybersecurity.
Collaborating with the Crypto Task Force
In January, in one of his first actions as acting SEC chair, Uyeda established another new unit known as the Crypto Task Force.
Chaired by Commissioner Hester Peirce, the Crypto Task Force has been asked to collaborate with agency staff and the public to set the SEC on a “sensible regulatory path” that respects the bounds of the law.
“To date, the SEC has relied primarily on enforcement actions to regulate crypto retroactively and reactively, often adopting novel and untested legal interpretations along the way,” Uyeda’s office said in a statement.
“Clarity regarding who must register, and practical solutions for those seeking to register, have been elusive.
“The result has been confusion about what is legal, which creates an environment hostile to innovation and conducive to fraud. The SEC can do better.”
Uyeda said the CETU will complement the work of the Crypto Task Force and will improve the agency’s handling of crypto enforcement.
Regulation by lack of enforcement?
Critics of Uyeda’s chairship have said that his actions so far have only served to prevent the SEC from continuing with enforcement actions that pre-date Trump’s election victory.
John Reed Stark, former head of internet enforcement at the SEC, has pointed out that Uyeda has already paused five key crypto enforcement actions since taking office, including actions against Coinbase and Binance.
“The SEC's strategy is to grind all crypto-related litigation to a screeching halt under the auspices of the need to wait for the findings of a new Crypto Task Force,” he said.
“Never before in the history of the SEC has this kind of radical turnabout in enforcement policy ever taken place. Strange things are afoot at SEC HQ.”
At the same time as opening the new units, Stark also noted that the SEC has begun laying off other crypto staff, including its former head of crypto litigation Jorge Tenreiro.
“My guess is that all SEC crypto-related investigations have already been secretly ‘paused’, and that SEC crypto-enforcement resources have already been shifted to other priorities,” said Stark.
Last week, Coinbase CEO Brian Armstrong confirmed that Coinbase has reached an agreement with the SEC to drop its unregistered securities case against the exchange.
