Securities and Exchange Commission Chair Gary Gensler is standing firm in his long-held view that many cryptocurrencies are subject to existing securities laws, despite pushback from the industry.
Gensler, who has also said that crypto firms are subject to the same rules as traditional finance, reinforced his view on Wednesday in prepared remarks at the 2023 Securities Enforcement Forum. His comments came amid a week of rabid speculation about the status of pending applications for spot bitcoin ETFs, which the regulator has not yet approved.
"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," Gensler said. "Congress could have said in 1933 or in 1934 that the securities laws applied only to stocks and bonds. Yet Congress included a long list of items in the definition of a security, including 'investment contract.'"
The agency has brought numerous cases against crypto firms over the past year, including ones against U.S.-based Coinbase and the world's largest crypto exchange, Binance. In those lawsuits, the agency often cites the Howey Test, a 1946 U.S. Supreme Court case involving citrus groves to determine whether transactions are investment contracts and thus subject to securities laws. However, that approach has garnered criticism from some, including Coinbase, which has said the SEC stretched its arguments in Howey "beyond recognition."
'Don't get me started'
The crypto industry has experienced turmoil, especially over the past year amid the collapses of crypto exchange FTX, crypto hedge fund Three Arrows Capital and the algorithmic stablecoin Terra USD.
Gensler called the industry's problems "not surprising."
"This is a field rife with fraud, scams, bankruptcies, and money laundering," Gensler said. "While many entities in this space claim they operate beyond the reach of regulations issued before Satoshi Nakamoto's famous white paper, they also are quick to seek the protections of the law, in bankruptcy court and litigating their private disputes."
Gensler also spoke in general about charges the SEC has brought against others, including a case involving the former CEO of McDonald's.
"And don’t get me started on crypto," Gensler said. "I won’t even name all the individuals we’ve charged in this highly noncompliant field."
Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.
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