On Tuesday, Gary Gensler, chief of the United States Securities and Exchange Commission (SEC) appeared before lawmakers to testify regarding crypto regulation along with other topics like climate, etc.
The SEC chief in his testimony to the US House of Representatives Committee on Financial Services spoke extensively about crypto assets as well as the intermediaries who are responsible for handling crypto-related financial services.
Speaking on the topic, Gensler voiced his concerns regarding cryptocurrencies and highlighted that investors need the essential protections offered by traditional federal securities laws. He reiterated his usual opinion that most cryptocurrencies are securities and must be treated the same way. He stated:
Nothing about the crypto markets is incompatible with the securities laws. The vast majority of crypto tokens are securities. Many crypto intermediaries are transacting in securities and have to register with the SEC.”
According to Gensler, crypto intermediaries provide several services that are usually provided by separate entities. These services include exchange, broker-dealer, custodial and clearing, and lending functions.
The commingling of the various functions within crypto intermediaries creates inherent conflicts of interest and risks for investors—risks and conflicts the Commission does not allow in any other marketplace.
The SEC chief has been one of the most staunch critics of the crypto sector and his regulatory reign also reflects the same. Not once, but in numerous instances the regulator has opined that all crypto assets except Bitcoin are securities.
In addition, he proposed stricter regulations to regulate the sale and exchange of digital assets, along with more clarity on who is responsible for regulating cryptocurrencies. He also highlighted that the agency should hold intermediaries accountable when it comes to digital asset securities.
Furthermore, Gensler said that the crypto market is “rife with noncompliance” and that is the biggest problem. He also urged lawmakers for additional enforcement authority though to do what exactly is still unclear.
Notably, Gensler’s recent opinion is no different than what he has already stated. Despite the massive backlash, the regulator has never failed to highlight the need for stringent regulation of the sector and how the SEC should be the key regulating agency.
While some crypto platforms might have engaged in unsavory practices that break the rules of the SEC in the last two years, the regulator has been on an enforcement spree.
In recent weeks, it has had several notable crypto firms under its radar accusing them of selling unregistered securities. While Kraken ended up paying a fine to the regulator, Paxos confirmed that he was having talks with the regulator. Coinbase, the second largest crypto exchange, expressed disappointment in receiving Wells Notice from the regulator.
It is only a matter of time to see what turns the crypto regulation in the US takes. While Gensler is pushing for more regulation and oversight of the digital asset market, it all lies in the hands of Congress to give the final decision.
Notably, Republican lawmakers like French Hill, Tom Emmer, Warren Davidson, etc have often criticized Gensler’s approach. In fact, on Sunday, Warren Davidson took to Twitter to say that he is introducing new legislation which aims to oust the SEC chief and replace him with a director.