SEC chair Gary Gensler is set to appear before a Senate committee to point out that many crypto exchanges could be operating as securities exchanges.
He argues that the legal status of each coin on exchanges could be different.
Gensler added that it is unlikely that crypto exchange platforms have zero securities.
The chairman of the United States Securities & Exchange Commission (SEC), Gary Gensler is set to appear before the Senate committee on September 14 to announce that in his belief, cryptocurrency exchanges may need to register as securities exchanges.
Gensler stated that the current crypto industry is not operating within regulatory frameworks that protect investors and consumers from illicit activity. He further highlighted consumer protection within the new asset class. He said:
This asset class is rife with fraud, scams, and abuse in certain applications. We can do better.
Previously, the SEC chief declared that the regulator was ready to take on cases involving cryptocurrencies. While he continued to highlight investor protection, he added that federal financial regulators should be “ready to bring” cases against bad actors in the crypto industry.
Gensler wrote a letter to Senator Elizabeth Warren (D-MA) in August 2021 highlighting the fact that digital asset investors are not well protected. The SEC head further suggested that regulators should have “plenary” or complete authority to regulate the cryptocurrency industry.
While Gensler admitted that the SEC does not have the jurisdiction to regulate cryptocurrencies, he urged Congress to regulate digital asset exchanges.
His latest remarks also emphasized that the securities regulator is working with the Commodity Futures Trading Commission (CFTC) which has overlapping jurisdiction in the crypto market. In addition, the securities regulator is also joining forces with the Federal Reserve, Department of Treasury, Office of the Comptroller of Currency and members of the President’s Working Group on Financial Markets.
Gensler urged crypto platforms to reach out to the SEC to have a discussion as many platforms enable trading for hundreds of tokens. He added that each token’s legal status further depends on the facts and circumstances surrounding each unique coin. The agency’s chair went on to state that it is unlikely that these exchange platforms with 50 to 1000 tokens have zero securities.
In his planned statement, Gensler reiterated that the views are his own, as he is not speaking on behalf of other Commissioners or the staff at the agency.
Gensler continues to argue that crypto exchanges could be unregulated securities exchanges given that many tokens could be deemed as securities. CFTC commissioner Brian Quintenz recently clarified that Ethereum is a non-security commodity, ending the ambiguity over the status of the second-largest cryptocurrency by market capitalization.