- SEC Chairman Gary Gensler likens the current crypto frenzy to the 1920s pre-securities law era, calling for stricter regulation.
- Gensler asserts that most crypto tokens are securities and fall under the SEC’s jurisdiction, necessitating exchanges to register with the regulatory agency.
In a recent development that has sent ripples across the cryptocurrency industry, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has likened the current state of the crypto market to the chaotic financial landscape of the 1920s, prior to the implementation of federal securities laws. Drawing parallels with an era rife with “hucksters, fraudsters, scam artists, and Ponzi schemes,” Gensler has emphasized the need for stringent regulation to protect public interests.
Speaking at the Piper Sandler Global Exchange and FinTech Conference in New York City, Gensler asserted that the majority of crypto tokens are, in fact, securities and thus fall under the SEC’s jurisdiction. He further stressed that exchanges listing such tokens must register with the regulatory agency to ensure the safety of the public’s trust in the capital markets.
The SEC, under Gensler’s leadership, has been proactive in its regulatory efforts. This week, the agency initiated separate actions against Binance and Coinbase, accusing them of unlawfully offering securities intermediation functions without proper registration. The SEC also alleged that these exchanges commingled investors’ assets, thereby violating regulatory norms.
Gensler has been vocal in his belief that most crypto tokens meet the investment contract test, thereby classifying them as securities. As such, he insists that crypto security issuers need to register their offerings with the SEC or meet the requirements for an exemption.
In response to claims from the crypto industry about the lack of ‘fair notice’ regarding their potentially illegal conduct, Gensler has been dismissive. He suggests that these entities may have made a calculated economic decision to risk enforcement as a cost of doing business.
Furthermore, Gensler has reiterated that crypto exchanges fall under the SEC’s purview. He believes that the alleged failures of these exchanges to comply with securities laws deprive investors of critical protections, including safeguards against conflicts of interest and routine inspection by the SEC.
Gensler has also criticized crypto exchanges that have failed to separate themselves from broker-dealer functions. He insists that these companies “know how to register” and has dismissed arguments that the rules on which assets are or are not securities are too murky.
Despite the mounting regulatory pressure, Gensler made no reference to allegations by Binance’s lawyers that he offered to be an advisor to the crypto exchange in 2019. At that time, Gensler was teaching at the Massachusetts Institute of Technology’s Sloan School of Management.
In conclusion, Gensler’s stance on cryptocurrency regulation is clear: he believes in the necessity of stringent oversight to protect investors and maintain the integrity of the capital markets. As the crypto industry continues to evolve, it remains to be seen how these regulatory measures will shape its future trajectory.
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