SEC and Federal Agencies Pursue Budget Boost for Crypto Oversight in 2025

The Securities and Exchange Commission (SEC) aims to bolster its enforcement and examinations division by incorporating over 50 new positions, as outlined in its latest budget request.

According to the SEC's fiscal year 2025 budget proposal, increased funding is deemed necessary to tackle emerging technologies such as artificial intelligence and shifts in investor communications, including platforms like Reddit forums and celebrity endorsements. The agency has identified cryptocurrency as a particular area of focus, citing concerns about noncompliance and the speculative nature of this asset class.

In its recent submission, the SEC remarked, "We’ve seen the Wild West of the crypto markets, rife with noncompliance, where investors have put hard-earned assets at risk in a highly speculative asset class. Such growth and rapid change also mean more possibility for wrongdoing." "As the cop on the beat, we must be able to meet the match of bad actors. Thus, it makes sense for the SEC to keep pace with the expansion and increased complexity in the capital markets," the SEC added.

Budget requests entail an annual appropriation process, forwarded to lawmakers in the House and Senate appropriations committees for legislation drafting. This legislative process, often protracted, may extend up to the deadline.

For the current fiscal year, the SEC has petitioned to augment its examination division with 23 new positions. This division conducts routine examinations to inform rule-making processes and uncover misconduct.

More resources will "strengthen the division’s ability to address critical and evolving risks such as those associated with the resiliency of critical market infrastructure, cyber and information security, and crypto assets and emerging technologies," the SEC said.

Furthermore, the SEC has proposed the addition of 33 new positions to its enforcement division, which has been actively pursuing cases against major crypto exchanges such as Coinbase, Binance, and Kraken, as well as various NFT projects.

Additionally, the agency has requested one additional position for its office of investor education, primarily focused on handling inquiries and complaints related to "fraud involving crypto asset securities".

In parallel, other agencies have submitted their budget requests. The Treasury Department's Office of Terrorism and Financial Intelligence has sought $230.5 million for fiscal year 2025, representing a 6.7 percent increase from fiscal year 2024. One of its primary objectives is to enhance transparency to detect illicit financial activities.

The Commodity Futures Trading Commission (CFTC) has requested additional resources for its Division of Clearing and Risk, responsible for overseeing derivatives clearing organizations (DCOs) and swaps clearing. The CFTC said in its budget request that the number of DCOs clearing products in digital assets has increased.

"All DCOs need to employ top-notch data breach security solutions," the CFTC said. "However, those participating in the new digital innovation ecosystem are exposed to additional risks that must be assessed, mitigated, and monitored, then examined accordingly by the Division. Each new digital asset operates differently and with its own specialized set of threat vectors which each carry its own unique set of risks that need to be identified, assessed and then examined."