• Sat. May 21st, 2022

‘Only a Few’ Cryptos Should Avoid SEC Oversight, Says Chairman Gensler

ByChad J. Johnson

Apr 4, 2022

The vast majority of crypto tokens in circulation are securities that should be overseen by the Securities and Exchange Commission, Chairman Gary Gensler said in a speech Monday.

“The fact is that most crypto tokens involve a group and entrepreneurs who raise funds from the public in anticipation of profits – the hallmark of an investment contract or security under our jurisdiction,” he said. he said during a speech at the Penn Law Capital Markets Association Annual Conference.

“Some, probably only a few, are like digital gold; they may not be securities,” Gensler added, likely referring to bitcoin BTCUSD,
-0.44%,
the most popular crypto token, according to Gensler, before joining the SEC, should be regulated as a commodity. Former SEC officials argued that ether ETHUSD,
+0.33%
should also be considered a commodity, although there has been no official guidance on the matter, and Gensler suggested, as a private citizen, that it might be considered a security.

Many cryptocurrency issuers have not registered with the SEC as issuers of securities, despite Gensler’s repeated argument that most digital tokens fall under its jurisdiction. Gensler’s predecessor, Jay Clayton, also argued that crypto token issuers were late in not registering with the agency.

The SEC has jurisdiction over those who issue securities to raise money from the general public, while the Commodity Futures Trading Commission oversees derivatives markets based on commodity markets. The CFTC does not, however, monitor the commodity spot markets. Therefore, a market for digital assets considered commodities would not be regulated like markets for stocks, bonds, or derivatives like options and futures.

CFTC Chairman Rostin Behnam argued that Congress should pass legislation giving his agency oversight of digital asset spot markets, though that would not resolve the debate over which digital assets are securities and those that are commodities.

Gensler also reiterated his intention to bring greater regulatory scrutiny to cryptocurrency exchanges like Binance, Coinbase COIN,
+2.51%
and Kraken. He said he’s asked staff to work on “getting the platforms themselves registered and regulated much like exchanges.”

“These crypto platforms perform similar roles to traditional regulated exchanges,” Gensler added. “So investors should be equally protected.”

In an interview with MarketWatch in February, Gensler warned that failure to register exchanges with the agency could result in fines or other penalties. “We will continue to pursue [enforcement actions]based on the facts and the law, wherever that takes us,” he said.

Read more: SEC Chief Gary Gensler Wants to Bring Public ‘Confidence’ Back to the Stock Market — and Even Crypto