The United States Security and Exchange Commission Chairman Gary Gensler has testified that most crypto tokens meet the Securities law definition and intermediaries have to comply with the Securities law. The Chair disclosed this in a testimony before the United States House of Representatives Committee on Financial Services.
Gary Gensler said in his opening statement that the views shared are his as the Chairman, making clear that he is speaking for neither his fellows nor the SEC but himself.
Looking at the crypto asset market, the Chair mentioned that everything it entails and is about is well deserving of the protections of the Commission’s securities laws.
He cited that Congress could have established over the years around 1933 or 1934 that securities laws are only applicable to stocks and bonds. Despite this, Congress included a number of items in the definition of a security, including the term “investment contract,” Gary said.
On this note, Gary is of the opinion that many crypto tokens potentially meet the investment contract test. Thus, as most crypto tokens are subject to securities laws, crypto intermediaries have to comply as well, he said.
“As I’ve previously said, without prejudging any one token, the vast majority of crypto tokens likely meet the investment contract test,” Gary Gensler.
Further, he stated that intermediaries in the industry are non-compliant, hence the problems arising in the market are not surprising. He compared the present events in the market to the 1920s before the launching of the federal securities laws.
Gary Gensler stated that the SEC has put in place enforcement actions to call faulters to order and protect investors. It has introduced rulemaking and has reinforced that existing rules apply to platform trading crypto asset securities as well ” so-called “DeFi” systems,” he said.
The chairman mentioned that an update to the “Enhanced Safeguarding Rule for Registered Investment Advisers” proposed by the commission in February will cover all crypto assets and enhance the protections that qualified custodians provide.” However, he declined to comment on any active, ongoing litigation by the SEC.
Crypto regulation has been a key topic of debate in the industry. Regulators are binding that the crypto industry is subject to regulation and cases like the United States deemed most crypto assets a security. However, Crypto asset intermediaries are not in the same view as the regulators and opine that if need be regulation should be clear and fair.
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