The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has explained how securities laws apply to cryptocurrency tokens as he outlined the commission’s priorities in regulating the crypto space. “Our role at the SEC is to ensure that the public still gets basic protection,” he stressed.
SEC Chair Gary Gensler on Cryptocurrency Regulation
SEC Chair Gary Gensler discussed cryptocurrency regulation and the agency’s 2022 regulatory agenda on CNBC Monday.
The chairman explained that, in general, “If you are raising money from the public, and the public is in anticipation of profit based upon that promoter, sponsor, that group’s efforts — that’s within the securities laws, and it’s within the securities laws because Congress painted with a broad brush.” He elaborated:
They want to protect you — the investing public — so that you have proper information, or what’s called full and fair information, and protect you against fraud and scammers and the like.
Gensler stressed that investments that call themselves a token “are still probably, possibly a security.”
While acknowledging that new ways to invest, including crypto tokens and Special Purpose Acquisition Companies (SPACs), are “exciting,” the SEC chairman emphasized:
Our role at the SEC is to ensure that the public still gets basic protection.
Gensler further explained: “What is kind of old and really important is this basic idea that if you raise money from the public and the public is thinking about a profit, you have got to give them basic disclosures and everything.”
He was also asked to comment about the increase in crowdfunding using cryptocurrencies. Reiterating that he will not comment on any particular project, the chairman detailed: “Crypto tokens, I will call them, are raising money from the public, and are they sharing with the public the same set of disclosures that helps the public decide and are they complying with our Truth in Advertising? Call it the Securities Act’s anti-fraud provisions.”
“There are thousands of these projects basically trying to raise money from the public so that they can back an entrepreneurial idea,” the SEC chairman described. While emphasizing that he supports innovation, Gensler noted that “it’s about bringing it into the securities laws.” He opined:
Unfortunately, way too many of these are trying to say: ‘Well, we are not a security. We are just something else.’
“I think that the facts and circumstances suggest they are investment contracts, they are securities, and they should register,” Gensler concluded.
He was also asked whether ethereum is a security, citing that the SEC views XRP as a security in an ongoing lawsuit with Ripple Labs and its executives.
However, Gensler declined to comment on whether ether is a security. Reiterating that he is not going to answer about any one crypto, the SEC boss said: “I’m the chair of a five-member Commission that’s also a civil law enforcement agency. So, we don’t get involved in these types of public forums, talking about any one project, one possible circumstance, and give legal advice over the airwaves that way.”
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Kevin Helms
A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.
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