In a recent interview, Gary Gensler, chairman of the Securities and Exchange Commission (SEC), presented his views on the crypto community. He reiterated that he considers all crypto assets and all transitions to be subject to U.S. securities laws except for Bitcoin.
Although crypto assets are yet to be officially classified, the SEC chair said “everything other than Bitcoin” is security. In his opinion, the people behind all crypto projects and networks are furtively trying to lure investors into buying the tokens.
There are people behind these cryptocurrencies using a variety of complex and legally opaque mechanisms, but at the most basic level, they are trying to promote their tokens and entice investors.
Additionally, Gensler argued that at the core, “these tokens are securities because there is a group in the middle, and people are anticipating profits based on that group.” However, Gensler’s views have been opposed by the financial lawyers present in the country.
On Sunday, Jake Chervinsky, financial lawyer and chief policy officer at the Blockchain Association, argued that Gensler’s words or opinion are not the law. He said:
The SEC lacks authority to regulate any of them until and unless it proves its case in court. For each asset, every single one, individually, one at a time.
The notion has been echoed by Hester Pierce, Commissioner of the SEC, who urged the involvement of Congress to accelerate the rollout of efficient legislation and official classification of crypto assets. Until then, regulators such as the SEC will take things into their authority via enforcement actions, as they have done several times this year.
In an interview earlier, she opined:
Using enforcement actions to tell people what the law is in an emerging industry is not an efficient or fair way of regulating.
There has been a rising concern that until there is a robust regulatory framework for digital assets in the US, the SEC will continue its war on crypto whether it has the jurisdiction or not.
Recently, the SEC cracked down on Paxos, the issuer of the third largest stablecoin, BUSD. The regulator sent the firm a “Wells Notice” and accused them of selling unregistered security. The firm acknowledged the notice but categorically disagreed and opined that BUSD is not a security under US federal laws.
A report from a consulting firm Cornerstone Research published in January stated that the SEC brought a record number of crypto-related enforcement actions last year. As per data, figures from 2022 have been about 50% up from 2021.
The two major regulators i.e. SEC and the Commodity Futures Trading Commission (CFTC) have been in a feud regarding the regulation of cryptocurrencies. Notably, lawmakers and regulators, including the SEC, have spent significant time and attention to confirm if cryptocurrencies comply with the definition of the Howey Test to fall under US securities laws. Several lawmakers and regulators, including Senator Lummis, admitted Bitcoin as a commodity while the rest to be a security.