Crypto Complaints Not Deterring SEC Enforcement Approach, Official Says

“Critics are upset because we’re not giving crypto a pass from the application of well-established regulations and precedents,” Mr. Grewal said.

“If we’re going to uphold our mandate, we can’t simply abandon the field when we confront potentially novel issues,” he said. “Non-enforcement…would be a betrayal of trust. That’s not an option for us.”

Mr. Grewal’s remarks underscored his agency’s recent scrutiny of digital assets. They followed a speech Thursday by SEC Chairman

Gary Gensler,

who signaled support for Congress handing some authority for cryptocurrency oversight to the Commodity Futures Trading Commission. Mr. Gensler in his speech also emphasized, though, his view that most crypto assets should be considered securities whose regulation falls to the SEC under the law.

Some crypto industry participants have accused the SEC of pursuing an agenda of “regulation by enforcement” in an uncertain legal environment. Mr. Grewal said Friday that he had a responsibility to bring cases on behalf of investors, including those who have lost money in the turbulent crypto market.

Crypto market turmoil has had an outsize impact on nonwhite and lower income investors, who may have been drawn to crypto investments because of skepticism of the financial system and of regulators who in the past have failed or ignored them, Mr. Grewal said.

“Restoring trust in the regulatory system and its institutions can’t start with us abandoning whole classes of investors by declaring our long-standing and well-established rules to be simply null and void for enforcement purposes,” he said.

SEC Chief Litigation Counsel Olivia Choe, speaking on the same panel, said the agency has had a “very active” year taking entities in crypto asset space to court, and intends to continue to “litigate aggressively.”

In May, the SEC said it had nearly doubled the size of its enforcement unit that focuses on crypto assets and cyber threats.

Jake Chervinsky, head of policy at the crypto lobbying group Blockchain Association, said Friday that accusations of regulation-by-enforcement aren’t a “baseless mantra.”

“It’s an undeniable feature of the SEC’s effort to expand its own jurisdiction beyond the bounds of the law,” Mr. Chervinsky said. “For many years, the SEC has run its entire crypto strategy through Director Grewal’s Division of Enforcement, while refusing to provide any guidance or propose any rules clarifying how upstanding crypto companies can meet its expectations.”

Some digital asset companies have strenuously pushed back against the SEC’s enforcement agenda. The chief legal officer for

Coinbase Global Inc.,

which operates a leading cryptocurrency platform, in July published a blog post accusing the agency of using one-off enforcement actions to try to bring all digital assets—not just securities—under its jurisdiction.

The post by Coinbase Chief Legal Officer

Paul Grewal

came after the SEC filed securities fraud charges against a former Coinbase employee. The company contended that the digital assets listed on its platform on which the charges centered weren’t securities, and has separately pushed the SEC to make formal rules on the issue.

Write to Richard Vanderford at richard.vanderford@wsj.com