The Securities and Exchange Commission, one of the major federal regulators looking to rein in the crypto industry, is having trouble hiring crypto experts, according to a new report from the agency’s inspector general.
Most federal agencies have an Office of Inspector General, or independent authority that reviews and oversees the operations of, say, the Federal Trade Commission or the Social Security Administration. On Thursday, the SEC’s division published a report on the financial regulator’s “management and performance challenges” in October.
These challenges include keeping pace with evolving technologies, like AI, as well as maintaining an in-the-know workforce. “[T]he SEC also faces challenges in recruiting specialists in crypto assets, which Enforcement considers critical to strengthening its capabilities to investigate new and emerging issues in crypto-asset markets,” wrote the Inspector General’s Office.
As for why the SEC is having trouble recruiting crypto experts, the report cited a “small candidate pool of qualified experts,” competition with alluring offers from the private sector, and candidates’ frequent conflicts with rules that prohibit the holding of cryptocurrencies. “This prohibition, according to SEC officials, has been detrimental to recruiting, as candidates are often unwilling to divest their crypto assets to work for the SEC,” read the report.
The federal agency already has complex ethics rules that prohibit employees who, for example, hold equity in a company from deciding on any applications that the company submits to the regulator.
The SEC’s difficulties in attracting crypto talent come amid a broader hiring downturn in the industry as well as the regulator’s acceleration of crypto enforcement actions in the past year. Since the collapse of the crypto exchange FTX in November 2022, the SEC has doubled down on enforcement actions, filing a series of lawsuits against companies and personalities, both big and small.
In January, the agency sued Gemini and Genesis for their Gemini Earn program, a yield-bearing product that the SEC alleged was akin to an unregistered security. Then, Gary Gensler, the SEC chair, set his sights on even larger figures in crypto: Justin Sun and Do Kwon, who both were charged with selling unregistered securities. And in June, he picked fights with the two of the biggest crypto exchanges, Binance and then Coinbase.
While the criminal trial (and eventual conviction) of FTX cofounder Sam Bankman-Fried has overshadowed the SEC’s actions over the past month, Gensler has still brought the hammer down on crypto companies. He most recently set his sights, along with the Justice Department, on SafeMoon.
“We’re pleased that the Office of the Inspector General reported that the SEC maintained a steady rate of hiring, remained a best place to work in government, slowed attrition below government averages, completed a substantial number of rulemakings, including those mandated by Congress, and took steps to address challenges that it previously identified,” said a spokesperson in reference to the Inspector General report.
Update, Nov. 6, 2023: Added in comment from the SEC.
