What you need to know about SEC as a crypto lover

There are many agencies that are incharge of regulations in the financial market and the crypto market is not an exception because it is also one of the biggest financial market we have today. Both the financial traditional markets we have and the cryptocurrency market needs regulations because of things that has happened previously to many investors.

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So without further ado, I will like us to go straight into the discussion of what or who SEC is all about. So follow me closely as I define or give you the full meaning, their aim and the history behind their formation.

What is SEC?

The word SEC stands for the U.S. Securities and Exchange Commission. This is a body established in the year 1934 by the Securities Exchange Act to work independently on their own to ensure that the financial transactions are following due regulation so as to avoid scamming investors and stealing their money.

It is a team of 5 persons who are appointed by the president of the United States and among the 5 persons, one of them will be acting as the chairman of the community and the others are commissioner and they also have some bodies under every communisiner that facilitates the work.

From the above introduction, you will understand that SEC major duty in the world of finance is to ensure that there is transparency in the financial market, there is efficiency, there is fairness and most importantly to protect the investors from any form of defrauding activities by this financial institutions.

With the SEC in place playing the above roles, investors get more confident when going into any investment that has been approved by them. This means that before an investment opportunity comes to the public the SEC must have checked it authencity and if it's worth investing on or it meets their rules and regulations then they will allow the public to invest in it.

How did SEC came about (History)

SEC initiative started after the incident of "Black Monday” on October 28, 1929. On this very day, the stock exchange experience a down time that made investors to loss billions of dollars in less than 24 hours and these almost crushed down the economic of the country during this period as from that, since there was no money to pay workers because of the crash, many Americans lost their job at that period.

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It all started when private companies comes to the public with investment advert and encouraging them to participate as the will make good returns from it. It was a pattern to defraud the investors after investing their money in their business. These went well with them as they defrauded a lot of people and that led to the incident of the "Black Monday” on October 28, 1929.

So investors became scared and worried as there was no transparency in the businesses any longer and no road map as to where the investment is going and the profit promised to them is sometimes too good to be real. The started questioning and seeking the intervention of the government.

The government came to the aid of its people with the introduction of the SEC in 1934 after properly consulting with other bodies as to how they can remedy the situation. This is when the body officially started working and they have help to keep the economy of the country going till this moment.

So the regulation that the SEC came up with immediately to help this situation was firstly all activities in the financial space must be transparent for all to see this help to restore investors confidence in most of the investment and companies and this also eliminated the frudlent act that initially was going on in the financial market.

As I have said earlier, the SEC team is made up of 5 persons i.e one chairman and 4 commissioner and these persons also work with divisions to ensure effective in the work. This means that there are 6 divisions created under the 5 selected person and they are as follows:-

Corporate Finance Division: Here, the work of this division is to ensure that all companies agree with the security regulation of the SEC so any company that doesn't agree won't be allow to operate.

Economic and Risk Analysis Division: Here in this category or this division, those available perform risk analysis of the company which is coming into existence and then know the policy that will be suitable for them so as to protect the funds of investors from risk.

Enforcement Division: There are always law breakers when a set rule is given hence this division aims at punishing the offenders who don't follow the rules and regulations.

Examination Division: A division set to also examine or check the securities organisation and be sure that they too are doing their job of complying with their set down rules. This means every body is checked within the SEC to avoid compromise.

Investment Management Division: Here, it is the responsibility of this division to ensure that the funds and asset for the investment are properly managed and not used anyhow. If the investor needs his investment funds at anytime he or she should be able to get it with any challenge.

Trading and Markets Division: Since our assets are used for the marketing and trading by the company to generate income and profit for themselves and a little for us, it is important to have a division who oversees the market trading.

SEC & Crypto Market

Having discussed what SEC is all about, their roles and the history behind their formation, we have seen clearly their importance when it comes to the financial market. The cryptocurrency market is one that recently meet with the SEC as well since it is also a financial institutions.

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So let's look at some of the interaction between the SEC and the crypto market recently and the outcome of the interaction and it's effect on the crypto market.

Early Interactions: The first ever interaction between the SEC and the cryptocurrency market was to determine if cryptocurrency can be classified under security assets under the U.S law and their conclusion on this was that it is possible that some of the crypto assets such as Bitcoin and Ethereum have met the requirements of being under securities.

Though the SEC also said in 2017 that most of the other cryptocurrency especially the ones coming up through ICO at the moment don't meet the requirements hence these are they type of assets that can cause commotion in the crypto space and lead to price decline and for that reason such asset must be on check at all times. Talks are still on going as to how these assets will be handled.

Recent Interaction: Just like we have the early interaction, we also have the recent Interaction which happens from 2020-2024.

Firstly in 2020, we saw a sudden decline in the price of XRP because of the lawsuits it has with the SEC which is still going on till this moment as the issues has not been completely resolved. The issues came based on the fact that XRP is not a registered security asset and billions of dollars have been used to invest in the project by different investors.

In the year 2021, the SEC came up with regulations that every crypto company must provide a detail and transparent transaction report to their customers which is a very good one for the investors.

After they regulation in 2021, the SEC also came up with a lawsuit against Blazar token in 2022 and they won the lawsuit against the founder of the token who goes with the name DeSalvo. The SEC tagged the token an illegal and unregistered token and also that the money generated by the founder was used for his personal use instead of putting it in the project.

Currently, we have seen in this very year that SEC approved Bitcoin ETFs which is indeed a great achievement for the crypto market as that alone made the crypto market to flourish greatly. Seeing that cryptocurrency is improving daily, there will be more meetings with the SEC and the different crypto companies in the world.

Conclusion

SEC is the securities and exchange commission that helps to regulate the financial market crypto market inclusive. They have overtime helped achieve transparency for investors reduce the risk which investors faces in investing on financial assets and also closed the business of most frudlant companies whose main aim was to defraud the masses.

The impact in the financial world can never be overemphasized. We have seen some of their decision and regulations taking most of our crypto assets to its all time high. There will be more interaction between SEC and cryptocurrency companies but the joy is that we are waxing stronger.

Finally, I want to thank you all for reading through my post today. If you have any questions or contributions, please do well to use the comment section of this post. See you all in my next publication.

Disclaimer: ^{This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your research and consult a financial advisor.}