What is the SEC and its impact on crypto?

The SEC plays a major role in the world of finance and crypto. This U.S. regulatory body helps determine how investors, companies, and markets are allowed to operate. Although the organization has existed since 1934, its influence on digital assets has grown significantly in recent years. For the traditional financial sector, the SEC has long been a key institution, but since the rise of Bitcoin, Ethereum, and thousands of other cryptocurrencies, the crypto world has increasingly watched the SEC's decisions. Whether it involves lawsuits, new regulations, or the approval of a Bitcoin ETF, the SEC's influence is felt globally. In this article, you will learn what the SEC does, why this regulator has such a major impact on the crypto market, and how its decisions can shape the future of digital assets.

Summary

• The SEC is the U.S. regulator for stocks and financial markets.
• The organization enforces laws and rules to protect investors.
• The SEC also monitors the crypto market and considers some tokens to be securities.
• Notable cases include Ripple (XRP), Coinbase, and Kraken.
• The SEC‘s decisions influence crypto markets worldwide.

What is the SEC?

The SEC, or Securities and Exchange Commission, is the U.S. financial regulator responsible for enforcing laws related to securities trading. The organization was created to protect investors, increase transparency, and prevent market abuse. The SEC oversees publicly traded companies, investment funds, brokers, and trading platforms. By monitoring financial markets, the SEC ensures that all participants receive accurate and complete information and that there is no fraud or manipulation. In recent years, the SEC has expanded its scope to the world of digital assets. As cryptocurrencies became more popular, questions arose about whether certain tokens fall under existing securities laws. As a result, the SEC has become an important player in the crypto sector as well.

How was the SEC created?

The SEC was established in 1934, following the 1929 stock market crash. That crisis had massive consequences for the U.S. economy and led to a loss of confidence in financial markets. The U.S. government decided that an independent regulator was needed to monitor the behavior of companies and investors. The SEC was tasked with ensuring financial transparency and protecting investors from fraud, manipulation, and misrepresentation. Since its creation, the SEC has survived multiple economic crises and adapted regulations to new market forms. From stocks and bonds to hedge funds and now digital assets, the SEC seeks to apply consistent rules to all financial instruments considered “securities.”

What exactly does the SEC do?

The SEC oversees U.S. financial markets and ensures that companies disclose their financial information. This builds investor confidence and makes markets more transparent. The SEC‘s responsibilities include:

• Monitoring publicly traded companies for accurate financial reporting.
• Investigating fraud, insider trading, and market manipulation.
• Approving or rejecting new financial products, such as ETFs.
• Taking action against companies offering unregistered securities.

Within the crypto sector, the SEC examines whether certain digital assets can be considered securities. If a token meets that definition, the project must register and comply with the same rules as companies issuing stocks. The SEC sees itself as a protector of investors who may not fully understand the risks or complexity of certain crypto investments.

The SEC‘s role in the crypto market

Regulating crypto companies

The SEC has become increasingly active in the crypto market in recent years. According to the agency, many tokens fall under existing securities laws. This means that companies issuing these tokens must register and comply with strict reporting and disclosure requirements. The regulator focuses not only on projects launching new tokens but also on trading platforms, staking services, and custodial providers. Companies that ignore these rules risk fines or legal action. For the crypto sector, this brings both legitimacy and uncertainty. Many companies complain about unclear guidelines and inconsistent interpretations of the law.

The SEC and crypto ETFs

A key part of the SEC‘s work involves reviewing applications for crypto ETFs (exchange-traded funds). These funds allow investors to gain indirect exposure to cryptocurrencies without holding the coins themselves. For a long time, the SEC rejected Bitcoin ETF applications, citing concerns about market manipulation, liquidity, and lack of oversight on crypto exchanges. In 2024, however, the SEC approved the first spot Bitcoin ETFs. This milestone was considered a breakthrough for the sector, opening the door to more institutional investors and enhancing Bitcoin‘s legitimacy as an investment asset.

The Howey Test and crypto

What is the Howey Test?

The Howey Test is a legal framework used by the SEC to determine whether an investment qualifies as a security. The test originates from a 1946 case, SEC v. W.J. Howey Co., and establishes that an investment is a security if it meets four criteria:

• There is an investment of money.
• The investment is in a common enterprise.
• There is an expectation of profit.
• The profit is primarily dependent on the efforts of others.

If a token or project meets these criteria, the SEC considers it a security.

When does the SEC classify crypto as a security?

The SEC regularly applies the Howey Test to digital assets. Many projects, especially those where investors expect profits based on the efforts of a development team, fall under securities law. This means such projects must register and comply with disclosure and investor protection rules. However, this interpretation is disputed, with developers arguing that cryptocurrencies and tokens are fundamentally different from traditional securities. This debate is central to the legal battles between the SEC and various crypto companies.

Notable SEC crypto cases

SEC vs Ripple (XRP)

One of the most famous cases in the crypto world is SEC vs Ripple Labs. The SEC claimed that Ripple offered unregistered securities through the sale of XRP. Ripple argued that XRP is a digital currency, similar to Bitcoin. The case lasted several years and drew worldwide attention. In 2023, the court partially ruled in Ripple‘s favor but also confirmed that some XRP sales could be considered securities, setting a precedent for future cases.

SEC vs Coinbase

Coinbase, one of the world‘s largest crypto exchanges, was sued by the SEC for offering unregistered securities. The SEC claimed that multiple tokens traded on the platform fall under securities law. Coinbase argued that the SEC‘s rules are unclear and that the agency had not issued specific guidance for digital assets. The outcome of this case may significantly impact how exchanges are regulated globally.

SEC vs Kraken

Kraken was fined by the SEC for its staking services. According to the regulator, these products qualified as securities because users received returns based on the company‘s efforts. This case highlighted that even services not directly related to token issuance can fall under securities laws if offered to U.S. customers.

SEC vs Telegram (TON)

Telegram, known for its messaging app, raised billions through its TON token project. The SEC ruled that the sale constituted an illegal securities offering. Telegram eventually ceased the project and paid a settlement. The case demonstrated that even large tech companies are not immune to SEC regulations.

SEC vs BlockFi

BlockFi offered crypto interest products, paying users for lending their assets. According to the SEC, this fell under securities law. The company paid a fine and adjusted its services to comply with regulations.

Gary Gensler and criticism of the SEC

Who is Gary Gensler?

Gary Gensler was appointed SEC chairman in 2021. He previously led the CFTC, overseeing commodities markets. Gensler was known for his expertise and strict approach. His policy focused on investor protection and enforcing rules in the crypto sector. According to him, the law is clear: many tokens are securities and must comply with regulations. In 2025, Gensler was succeeded by Paul S. Atkins, appointed by the U.S. Congress as the 34th SEC chairman.

Criticism from the crypto industry

There is significant criticism in the crypto world about the SEC and its approach. Companies argue that the SEC primarily enforces rules through lawsuits rather than providing clear guidance. This approach could slow innovation and force companies to relocate outside the U.S., often to countries with more predictable regulations like Switzerland or Singapore.

New direction for the SEC?

The SEC seems to be gradually adapting to the changing market. There is increasing talk of specific guidance for digital assets and cooperation with other regulators. However, enforcement remains a core part of its strategy. In the coming years, it will become clear whether the SEC softens its approach or continues strict compliance with traditional securities law.

What is the Dutch equivalent of the SEC?

AFM (Authority for the Financial Markets)

In the Netherlands, the AFM supervises financial markets. The organization protects investors, monitors transparency, and oversees companies offering investment products. The AFM also plays a role in the crypto market, evaluating whether companies providing crypto services comply with the Financial Supervision Act.

DNB (De Nederlandsche Bank)

DNB oversees financial institutions, payment systems, and financial stability. In the crypto sector, it supervises custodial and exchange service providers. Companies operating in the Netherlands with crypto must be registered with DNB to operate legally.

MiCAR

MiCAR, or Markets in Crypto-Assets Regulation, is European legislation being phased in from 2024. It aims to create uniform rules across all EU countries. MiCAR is designed to provide clarity and consumer protection while encouraging innovation in the crypto sector. In the coming years, it will play a key role in regulating crypto across Europe.

Potentially more power for the CFTC

In the U.S., there is debate over whether the CFTC (Commodity Futures Trading Commission) should have more authority over the crypto market. The CFTC oversees commodities and derivatives and is seen by some as a more flexible regulator than the SEC. If responsibility shifts from the SEC to the CFTC, it could lead to clearer rules and fewer legal conflicts, potentially fostering innovation.

What does the SEC mean for crypto investors?

The SEC directly impacts markets. When the SEC takes action against projects or companies, it can significantly affect cryptocurrency prices. Regulation can increase trust and safety, letting investors know projects comply with rules. On the other hand, strict enforcement can create volatility and uncertainty. For long-term investors, clear guidance from regulators can ultimately be positive. A well-regulated market attracts institutional investors and can contribute to more stable pricing of digital assets.

Frequently Asked Questions

Which cryptocurrencies are approved by the SEC?

The SEC considers Bitcoin a digital asset, not a security. For other cryptocurrencies, such as Ethereum, the legal status has not yet been formally established.

Who is the new SEC chairman?

The SEC does not have a CEO but a chairman. Since April 2025, Paul S. Atkins has been appointed as the 34th chairman of the SEC.

What does the SEC mean for crypto globally?

The SEC is a U.S. regulator, but its decisions have worldwide influence. When the SEC introduces rules or files lawsuits, markets around the world react.

Will regulation limit crypto growth?

Regulation may create short-term uncertainty, but in the long term, it can increase trust and adoption.