2024 cryptocurrency and gold redemption reaches a record high of nearly 20 billion dollars. Will there be a regulatory spring after the election?

Author: flowie, ChainCatcher

Recently, U.S. regulators seem to be accelerating their enforcement efforts in the crypto space as they rush to meet performance targets for the upcoming end of the fiscal year 2024.

Last week, The Wall Street Journal reported that the federal government is investigating cryptocurrency company Tether for potentially violating sanctions and anti-money laundering regulations. Although Tether has denied the allegations, it has still caused some panic in the market.

Throughout October, the SEC has charged over 20 crypto projects and individuals, including Cumberland, Gotbit, CLS, ZM Quant, Saitama, and Robo Inu, seizing more than $25 million in cryptocurrency. Many of these charges have been enforced in conjunction with the FBI and DOJ, with crypto market makers and trading firms that are closer to the money becoming key targets.

With U.S. regulators not slowing down their scrutiny of crypto, the number of lawsuits and settlements in 2024 is expected to hit a record high.

2024 Crypto Settlements Near $20 Billion Record High, Leading Firms Become Key Targets

The year 2024 is witnessing a surge in U.S. crypto regulatory enforcement. According to Coingecko data, as of October 9, 2024, the amount of crypto enforcement settlements by U.S. regulators has reached nearly $20 billion, a 78.9% increase from 2023, accounting for nearly two-thirds of the total settlement amount over the past five years. Given that 2024 is not yet over and regulatory actions have not slowed down, it is anticipated that this year's crypto lawsuits and settlements will surpass those of 2023.

From the SEC's perspective, a report updated by Social Capital Markets on October 19 shows that the SEC's fines in the crypto sector for 2024 have reached $4.68 billion. Since 2013, the SEC has imposed a total of $7.42 billion in fines on cryptocurrency companies and individuals, meaning that 63% of the total fines have been concentrated in 2024.

The fine amount in 2024 has increased by 3018% compared to $150.26 million in 2023.

Although the fine amounts have increased, the number of cases has decreased. In 2024, the SEC has only taken 11 enforcement actions in the crypto space, far fewer than the 30 actions in 2023.

The SEC's enforcement strategy in the crypto sector has clearly shifted, focusing on representative cases and taking more impactful enforcement actions (such as higher fines and more vigorous publicity) to establish industry precedents.

This year's massive fines from the SEC are primarily attributed to Terra and its co-founder Do Kwon, setting a precedent for SEC enforcement in the crypto space.

This year, besides Terra, leading firms across various crypto sectors have not escaped the SEC's regulatory lawsuits.

In April, DeFi leader Uniswap Labs and ConsenSys both received Wells Notices from the SEC before litigation, accused of violating securities laws with their products and failing to register as broker-dealers, as well as participating in the issuance and sale of certain unregistered securities. ConsenSys was officially sued by the SEC on June 28.

On August 28, NFT market leader OpenSea and leading crypto exchange Crypto.com also received Wells Notices, accused of trading NFTs or tokens on their platforms that may be considered unregistered securities.

In October, the SEC, in conjunction with the FBI and DOJ, took enforcement action against the largest meme market maker Gotbit, and accused leading market maker Cumberland of violating securities laws.

As the market speculates on who the next regulatory target will be, Fox Business reporter Eleanor Terrett recently stated on X that no major cryptocurrency participants registered with the SEC in 2024, but the commission still included cryptocurrencies in its 2025 review priority list.

Terrett speculated, "The only two crypto assets that have interacted with the SEC in a regulatory role (rather than an enforcement role) are Bitcoin and Ethereum ETFs. Is the review focusing on these ETFs and the companies associated with them?"

According to The Wall Street Journal, the U.S. Treasury has set its sights on the largest stablecoin issuer, Tether.

Oppressive Regulation as a Catalyst for Memes, Will Trump's Presidency Be Bearish for Memes?

Nic Carter, co-founder of Castle Island Ventures, stated on his social platform that the hype around meme coins is largely a reaction to the SEC's oppressive regulation. If the SEC were to regulate rationally, the demand for trading meme coins would decrease.

Crypto KOL @WutalkWu also believes that one regulatory reason for the meme boom is that the SEC does not allow issuers to assign value to tokens; otherwise, they would need to register as securities.

He stated that under such regulatory conditions, many VC tokens have become meme coins. What should have been equity investments, revenue sharing, and long-term follow-ups by VCs have turned into treating projects as memes for speculation.

However, if Trump is elected, the situation may change. Overseas crypto KOL @malekanoms analyzed that Trump's victory would have a bearish effect on memes.

@malekanoms believes that a Republican victory would overturn everything, restoring Initial Coin Offerings (ICOs), implementing universal airdrops, and rationalizing other forms of tokens. Additionally, they might make fee conversions and token dividends possible. The rationalized regulation in the U.S. would refocus attention on dApps and other truly important matters, but it could also lead to a prolonged bear market.

Increased Regulatory Costs for Enterprises, Hiring Officials Becomes a Trend

To avoid the operational costs associated with hefty fines, crypto companies have increasingly been hiring government officials.

FOX reporters noted that this year, the "revolving door" phenomenon at the SEC has been particularly pronounced, with several well-known officials leaving to join private companies.

• Former Acting Head of the Crypto Assets and Cyber Unit Carolyn Welshhans joined Morgan Lewis, focusing on securities enforcement matters.
• Former Enforcement Division Director Gurbir Grewal joined Milbank Law as a partner, and the firm is currently representing clients like Binance in lawsuits initiated during Grewal's tenure.
• Former Head of the Crypto Assets and Cyber Unit David Hirsch joined McGuireWoods LLP to provide consulting services on crypto-related matters and cybersecurity regulations.
• Ladan Stewart, who previously filed lawsuits against Coinbase and Ripple for the SEC, has also joined White & Case to assist clients in dealing with SEC enforcement actions related to crypto and other fields.

In addition to hiring officials, Uniswap's launch of Unichain is, in some respects, a response to regulation. Crypto KOL @_FORAB believes that future DeFi projects with native token staking rewards will likely follow Uniswap's lead in launching their own application chains to avoid regulatory issues related to securities. "After all, the cost of running a standalone chain is much lower than paying fines to the SEC."

Will Gary Gensler's Term End Bring a Spring for Crypto Regulation?

In a few days, the 2024 U.S. elections will conclude. Whether Trump or Harris wins, SEC Chairman Gary Gensler may resign early, as his term was originally set to expire on January 5, 2026.

However, Trump explicitly stated at the Bitcoin conference in July that he would fire Gensler, while Harris's team has met with crypto industry insiders and privately indicated a desire to reset industry relations.

U.S. Congressman French Hill (R-AR) stated in an interview with the Thinking Crypto podcast that the SEC should have new leadership next year, regardless of which party controls the White House.

Ripple Labs CEO Brad Garlinghouse also predicts that Gensler will leave after the upcoming presidential election, regardless of the election outcome.

According to CNBC, potential successors for Gensler include J. Christopher Giancarlo and Heath Tarbert, both former chairmen of the Commodity Futures Trading Commission (CFTC) during Trump's first term, current Robinhood Chief Legal Officer Dan Gallagher, who has served as SEC commissioner twice, and Paul Atkins, who served as SEC commissioner during the George W. Bush administration.

Based on their past statements or regulatory attitudes during their terms, they are generally more favorable toward cryptocurrencies compared to Gensler.

In addition to hoping for a more lenient attitude from U.S. regulators, crypto companies need clear regulatory rules. Rather than spending significant resources on how to avoid lawsuits, crypto companies may prefer to focus on building under clearer rules.

Consensys sent an open letter to future U.S. presidents last week, calling for clear and supportive regulations for cryptocurrencies and Web3.

SEC Commissioner Mark T. Uyeda recently pointed out that countries in the Indo-Pacific region, such as Japan, Singapore, and Hong Kong, have established clear frameworks that support innovation while protecting investors. In contrast, the U.S. lacks clear guidelines, creating uncertainty for market participants. He will urge the U.S. to adopt a more proactive stance on crypto regulation.