In a highly anticipated appearance before the Senate Banking Committee, Securities and Exchange Commission (SEC) Chair Gary Gensler is set to reiterate his stance on the regulatory landscape of crypto today (10:00 am ET). Drawing from his pre-released testimony, Gensler remains unwavering in his belief that the majority of crypto assets fall under the purview of the SEC and should be treated as securities.
Gensler will emphasize, “There is nothing about the crypto asset securities markets that suggests that investors and issuers are less deserving of the protections of our securities laws.” He further elaborated on the historical context, noting that Congress, in its 1933 and 1934 securities laws, did not limit the definition of securities to just stocks and bonds. Instead, they included a broad list of over 30 items, encompassing the term “investment contract.” Gensler stated, “As I’ve previously said, without prejudging any one token, the vast majority of crypto tokens likely meet the investment contract test.”
Gensler Will Maintain His Stance On Crypto
This perspective aligns with Gensler’s consistent viewpoint that most crypto intermediaries should comply with securities laws. He highlighted, “Given that most tokens are subject to the securities laws, it follows that most crypto intermediaries have to comply with securities laws as well.”
Drawing parallels with the past, Gensler remarked, “Given this industry’s wide-ranging noncompliance with the securities laws, it’s not surprising that we’ve seen many problems in these markets. We’ve seen this story before. It’s reminiscent of what we had in the 1920s before the federal securities laws were put in place.” He also pointed out the SEC’s proactive approach in addressing these issues, mentioning the enforcement actions taken to ensure investor protection and the rulemaking initiatives targeting crypto security markets.
However, Gensler will make it clear that he will refrain from commenting on ongoing litigation during the hearing.
The backdrop to this hearing is a series of recent court decisions that have challenged the SEC’s stance on Bitcoin and crypto regulations. Notably, Grayscale secured a victory in August when a DC circuit judge mandated the SEC to re-evaluate the asset manager’s application for a Bitcoin spot ETF. Similarly, Ripple Labs achieved a partial win when Judge Analisa Torres ruled that some of Ripple’s XRP sales did not violate securities laws, while other direct sales to institutional investors were deemed securities.
Furthermore, the SEC’s recent legal battles with major exchanges, including Coinbase and Binance, have been a focal point of discussion for the industry. Both companies face lawsuits from the SEC for not registering.
Despite these setbacks, Gensler will remain steadfast in his belief that the SEC should oversee the crypto industry. His testimony today at 10:00 am ET is expected to repeat the SEC’s position. In particular, the post-speech question and answer session will be interesting. How will Gensler respond to losing to Grayscale over a Bitcoin spot ETF, how will Gensler respond to questions about regulatory gridlock for crypto?
At press time, BTC saw a swift recovery from yesterday’s crash below $25,000 and was trading at $25,777.
Featured image from Financial Times, chart from TradingView.com