In a keynote address before the American Bar Association on July 21, Chairman Gary Gensler of the Securities and Exchange Commission reminded the audience that a number of creative token-based securities still need to report to the commission.
Gensler's remarks were broadly focused on security-based swaps, regulation for which saw a dramatic overhaul following the Dodd-Frank Act, during the time when Gensler was chairing the Commodity Futures Trading Commission.
"There are initiatives by a number of platforms to offer crypto tokens or other products that are priced off of the value of securities and operate like derivatives," said Gensler. He continued:
"Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These platforms — whether in the decentralized or centralized finance space — are implicated by the securities laws and must work within our securities regime."
Global synthetic securities have been a popular application of crypto technology, allowing global users to access otherwise off-limits investments, especially those in the United States. Last year, the SEC and CFTC settled charges against Abra for offering these kinds of swaps without checking the kinds of users who were accessing them.
It may be this sort of case that Gensler alluded to when saying: "We’ve brought some cases involving retail offerings of security-based swaps; unfortunately, there may be more."
It was only this week that crypto exchange Binance announced that it would be delisting these types of tokens globally. At the time, Michael Kott, CEO of CM-Equity — a 19-year-old German financial services firm through which Binance offered the service— told The Block that “nobody forced” Binance to stop the offering. Binance also said, "we believe shifting our commercial focus to other product offerings will better serve our users."