SEC Chair Gary Gensler has testified before the House Financial Services Committee. In his recent Congressional testimony, Gensler reiterated the SEC’s stance of being technology-neutral and not pre-judging. Some believe he missed an opportunity to be seen as a visionary leader by opting for a more nuanced compliance strategy, acknowledging that not all digital assets should be automatically classified as securities.
During the testimony, a member of Congress told Gensler, “It’s clear you are working to consolidate your power even though it means crushing opportunities for everyday Americans and the financial future of the country.”
Gensler pointed out that non-compliance is happening in the cryptocurrency industry, which has led to various problems. He compared the situation to what occurred in the 1920s before the government introduced securities laws. To address this, the SEC has taken both settled and ongoing legal actions to hold those breaking the rules responsible and safeguard investors.
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Furthermore, the SEC is updating its rules to include all crypto assets, not just funds and securities, to improve the protection provided by qualified custodians.
He said, “Given this industry’s wide-ranging noncompliance with the securities laws, it’s not surprising that we’ve seen many problems in these markets. As I’ve previously said, without prejudging any one token, the vast majority of crypto tokens likely meet the investment contract test. Given that most crypto tokens are subject to the securities laws, it follows that most crypto intermediaries have to comply with securities laws as well.”
Additionally, the SEC has taken steps to regulate the crypto securities markets through rulemaking. They’ve clarified that existing rules apply to platforms trading crypto securities, including decentralized finance (“DeFi”) systems. They’ve even proposed new rules to define certain crypto-related exchanges.
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