On Wednesday, Gary Gensler, chairman of the United States Securities and Exchange Commission (SEC) commented on the crypto regulations. He said that there are already rules for regulating the crypto market but the problem is compliance.
Testifying at the House Appropriations Subcommittee on Financial Services and General Government, Gensler said that rules for the cryptocurrency market already exist but that the industry is still “rife with noncompliance.” Additionally, he reiterated his opinion that most of the coins and tokens in the crypto space are securities.
Sanford Bishop, a Democrat lawmaker from Georgia asked Gensler if the SEC has “any plans to issue a rule to clarify how securities laws apply to digital assets,” echoing a common refrain from the crypto industry that has for years called for “regulatory clarity.”
To this, Gensler, in his usual form, sticking to his usual stance, said that the rules for crypto could not be any clearer. Quoting him:
The regulations actually already exist, sir. They’re called the securities regulation, and so there are disclosure regulations for when somebody tries to raise money from the public.
Gensler has reiterated his opinion that most digital assets except Bitcoin fall under securities on various occasions. Similarly, he stated that most crypto tokens possess the quality to be classified as securities. In his words:
Crypto tokens—without prejudging any one of them—you could look at nearly, most of them, and you could find a group of entrepreneurs with a Twitter site, with a website, with individuals, and I can bet that most of you are not visited by decentralized, non-existent management.
In the past weeks, the SEC has continued to carry a “regulation by enforcement” approach as called by many when it comes to crypto. The agency has been continuously cracking down on crypto companies and projects by alleging them of violating federal laws and selling unregistered securities.
Keeping this context in the picture, Gensler added that there are already rules in place to protect consumers but the noncompliance from the industry is concerning. On being asked by Bishop about specifics on crypto regulation.
We’ve seen the Wild West of the crypto markets, rife with non-compliance. Frankly, of the ten or twelve thousand tokens, there are very few that don’t have a group of entrepreneurs in the middle that the public is counting on. So most are securities under the securities law.
The SEC has been on an enforcement spree and has targeted some of the most recognizable crypto brands this year with its crackdown intensifying following the unexpected bankruptcy of crypto exchange FTX in November.
In January, the regulator hit Genesis and Gemini with charges for offering unregistered securities. About a month later, it fined American crypto exchange Kraken $30 million for violating securities laws. Right after Kraken, it sent a Wells Notice to Paxos for selling unregistered security targeting the stablecoin BUSD.
And just last week, it issued another Wells Notice to US-based crypto exchange Coinbase alleging that the company’s staking products constitute unregistered securities. The notice means that enforcement action against Coinbase is likely forthcoming. The firm executives severely criticized the regulator and also said that the US is losing its position as the crypto hub.
Gensler’s opinion has been criticized by lawmakers, regulators, and industry participants more often than not. The SEC chief has also been summoned by the lawmakers to appear on April 18. Patrick McHenry, Chairman of the United States House Financial Services Committee, said that the oversight hearing will seek clarity on Gensler’s rulemaking and approach to digital assets and this is the first hearing of it.