SEC Chairman Gary Gensler seeks to curb crypto exchanges, digital assets and stablecoins
Yesterday the chairman of the SEC Gary Gensler testified before the House Committee on Financial Services share her take on the SEC’s goals and why it needs more money to fulfill its mission. As expected, much of the testimony revolved around digital assets and the need for more regulation and stronger investor protection provisions.
When asked whether digital assets should be considered securities, Gensler said each should be considered on the basis of “facts and circumstances” while encouraging issuers to come talk to them. He then went on to say that if you give money to an issuer and then build something with those funds, and there is a hope of profiting from that business, that aligns with the concept of investment and must comply with existing securities law.
During the previous administration, under the direction of Jay clayton, the SEC has publicly stated that Ethereum is sufficiently decentralized and therefore is not considered a security. When asked directly if Ethereum and Bitcoin weren’t securities, Gensler was reluctant to adhere to past guidelines, saying he didn’t “want to get into a single token.” Gensler referred to the statement:
“I think securities laws are pretty clear, if you raise money from someone else and the investing public believes… anticipates or has a reasonable anticipation of profits based on the efforts of others, which falls within the framework of the law on securities… ”
He said Bitcoin is a speculative asset and has a store of value. But Bitcoin is also used to try to arbitrate between regulatory regimes.
Regarding stablecoins, Gensler said that “even poker chips in a regulated environment are a good thing.”
It seemed to differ between stablecoins that just hold cash or stablecoins that work more like a mutual fund – these should be regulated as a safety. Gensler said: “We already have digital money… it’s called digital bank deposits,” thus diminishing the service provided by stablecoins.
“What are they [stablecoins] give you more?
Gensler believes that stablecoins were used to avoid anti-money laundering rules and tax collection when trading platforms were unable to access banks.
“I think a lot of these stablecoins… have grown over the past 8 years inside trading platforms, around the world, to avoid anti-money laundering laws and tax compliance,” Gensler said. He has expressed concern that stablecoins will undermine the banking system and clearly believes that increased oversight is needed in this sector of digital assets.
Gensler received criticism for the Commission regulation by enforcement agentst approach that has hampered the digital asset sector, an industry that wants clear rules. In the past, Gensler has appeared to encourage Congress to draft legislation for better regulatory guidance for the SEC and CFTC, but it has seemed to back down from that earlier position.
Gensler said the law is clear enough and that between the CFTC and the SEC, the two agencies have good authority.
“I don’t think there’s a need to put something new in place,” Gensler said. “If Congress cuts something, it could undermine 90 years of successful law. “
He added that they currently have “strong authority” over crypto exchanges where people “trade securities”.
“What is happening is that we have a platform with a few commodities but mostly stocks.”
The next question might be how the SEC handles all these crypto exchanges that operate as a securities trading platform but not regulated like the NASDAQ or the NYSE. Gensler seems to think they should all come in and register.
While the United States is unlikely to follow a draconian course like China – by banning all of this, you can expect more enforcement action targeting digital asset service providers – if it engages with investors. Americans.
You can watch the full audience below.