A new report sheds light on the extent of regulatory scrutiny the cryptocurrency industry is facing as it reveals that crypto companies paid close to $32 billion in settlements since 2019, This shows the financial risks of operating in the digital assets space as countries all over the world try to regulate cryptocurrency.
Most of these settlements involve defunct entities like FTX and its affiliated organization Alameda Research. Both these firms were subjected to a heavy penalty of $12.7 billion in August this year by the Commodity Futures Trading Commission (CFTC) despite FTX's collapse two years ago, making it the largest regulatory settlement in the crypto world.
However, such settlements are not restricted to fallen crypto companies as Binance, the world’s largest operational cryptocurrency exchange made a $4.3 billion settlement with multiple U.S. agencies in November 2023. This shows that even crypto industry stalwarts have to bear the brunt of regulatory challenges.
The trajectory of enforcement actions has been steep as there is an 8327% rise in settlements’ value in 2024. In 2023, US regulators collected $10.87 billion in settlements which has increased to $19.45 billion as of October 2024.
Other high-profile cases include the $4.7 billion settlement following Celsius's collapse and the $4.5 billion penalty imposed on Terraform Labs, highlighting that the regulators’ are determined to act on wrongdoings across various segments of the crypto ecosystem.
This regulatory spotlight on crypto companies dates back to 2019 when FTX wasn’t there. At that time, Block.one had to pay a $24 million fine to the SEC for unregistered securities sales. In 2020, Telegram was subjected to a $1.24 billion fine for its Gram token offering which shocked the crypto world. Even during the 2021 bullish market Tether has to pay $18.5 million to the New York Attorney General for its stablecoin tokens.
While the SEC has been a prominent actor in the regulatory landscape the Department of Justice and Treasury Department have increasingly targeted both defunct and operational crypto companies. As of October 2024, there have been 25 enforcement actions with settlements exceeding $10 million.
Hence it is of paramount importance that crypto companies remain vigilant about regulatory changes across the world and adapt accordingly to be compliant with the laws of the country where they are used. The era of regulatory ambiguity is slowly being replaced by an environment of strict oversight and substantial consequences for non-compliance.