SEC Chair’s ‘Very Objectionable’ Approach to Crypto Sees Only ‘A Small Number’ of Cryptocurrencies as Not Securities
Gary Gensler says he’s not “negative or a minimalist about crypto,” rather standards established by Congress which can be changed by them “have a very broad definition of a security.”
US Securities and Exchange Commission (SEC) Chairman Gary Gensler told the Senate Banking Committee on Tuesday that he and his team are working on protecting investors through better regulation of the thousands of new crypto assets.
The Wall Street’s top regulator is actually working overtime, he said, to create rules to oversee the cryptocurrency market.
Gensler told Sen. Catherine Cortez Masto, D-Nev., the agency needs “a lot more people” to evaluate “6,000 projects” and determine whether they qualify as securities.
Five months into his tenure atop the SEC, Gensler told lawmakers that the SEC does not have direct oversight over crypto exchanges and they need to be registered with the Commission.
“They haven’t yet registered with us, even though they have dozens of tokens that may be securities.”
This was in response to Senator Elizabeth Warren illustrating how when cryptocurrency exchanges temporarily went down; they ended up wiping out “$400 billion” from the market in a matter of hours.
This has been Senator Warren’s criticism of crypto’s claims to financial inclusion as she further pointed to high fees on “DeFi exchanges.”
The SEC is trying to get broader powers to regulate crypto, when it should be focusing on getting better at using its existing powers.
These bureaucrats have only gone after Bitconnect in 2021 and have been dissaproving bitcoin ETFs for 5 years using an archaic 80 year old law.
— Alex Krüger (@krugermacro) September 14, 2021
Call for Clarity
While some lawmakers pressured the SEC chief to pick up the pace, Sen. Pat Toomey, a Pennsylvania Republican, pressed Gensler on “lack of helpful SEC public guidance,” explaining how the regulator makes the distinction between which cryptocurrencies are a security and which aren’t.
In his remarks, Gensler said that “a small number” of cryptos are not securities, but he believes many are.
Toomey then called for “clarity” on whether stablecoins meet the definition of a security as he believes they are not, but public clarity “could be helpful.”
He also commented on Gensler’s approach calling it “regulation by enforcement” and that it’s “very objectionable.”
But the SEC boss said that they are just following standards established by Congress and the courts.
“You’ll find I’m not negative or a minimalist about crypto.”
“I just think it would be best if it’s inside the investor protection regime that Congress laid out.”
"I don't happen to have a view on the value of a given token. But I do have a view that the value of the underlying technology is enormous. It's going to transform finance, it's going to do wonderful things for consumers. I don't want us to stifle the innovation," @SenToomey. pic.twitter.com/Kct5sPuLAq
— Squawk Box (@SquawkCNBC) September 15, 2021
Gensler argued that US securities laws and federal jurisprudence on the topic should provide ample clarity for entrepreneurs whether their inventions are securities under the law.
“This Congress could change the laws, but the laws we have right now have a very broad definition of a security.” “There is a very specific litany of the instruments that constitute securities.”
Toomey and his Republican colleagues also voiced concerns about the regulator’s potential to stifle innovation without a public set of guidelines.
Sen. Mark Warner, D-Va.
“As someone who shares some of your concerns about crypto, I will acknowledge that you only put one ‘Wild’ in front of ‘West,’ as opposed to two.” “As somebody who managed to do pretty well financially because of innovation, I’m all in. But we do need some guidance. We do need some direction.”