The crypto community rejects SEC chairman Gensler’s claim that regulation for capital markets, crypto should be the same
A recent tweet from the SEC Chair Gary Gensler clarified its position on crypto markets, saying they should be treated the same as other capital markets, regardless of digital assets that use “different technologies.”
“There is no reason to treat the crypto market differently than the rest of the capital markets just because it uses a different technology.”
Crypto markets cannot escape securities laws
In particular, Gensler referred to US securities laws as they relate to crypto lending. Using the 1966 National Traffic and Motor Vehicle Safety Act as an analogy for protecting motorists, the SEC Chair said 1930s securities laws also protect investors.
“We can dispense with the idea that crypto lending is not subject to regulation. On the contrary, the rules have been around for decades. The platforms are not following them.”
Gensler addressed recent market turmoil, in which specific CeFi lenders froze withdrawals and/or filed for bankruptcy — adding that these types of events are precisely why crypto firms should comply with securities laws.
Drilling deeper on this point, the SEC chief suggested that some crypto platforms were eschewing “time-tested investor protection” by rebranding a product or its associated promised benefits. However, citing legal precedent, Gensler said a product’s economic realities, not its labels, determine whether securities laws apply.
With it, he slammed non-compliant platforms that operate as if they had a choice. More so, those who deliberately choose to flout the law.
“Rather, it’s as if these platforms are saying they have a choice — or worse, saying, ‘Catch us if you can,’
It should be noted, when Gensler spoke to the FT in September 2021, Gensler had also warned crypto platforms that they faced “survival risk” if they ignored existing frameworks. He also mentioned that cryptoassets were “no different than others” when it came to public policy.
Society reacts
Twitter users took the opportunity to fire back at Gensler; notable themes included ignoring indiscretions from major banks and investment managers and accusations of deliberate prevents crypto markets.
Several prominent crypto figures also came into being to move the issue of crypto regulation forward. For example, the founder of Bankless media, Ryan Adams, asked Gensler if he had gotten involved in the crypto community. With that, Adams sent an invitation to appear on the Bankless show.
But, Tony Edwards of the Thinking Crypto podcast was less gracious about Gensler’s views on treating crypto markets the same as other markets. Edwards argued that the global token distribution, which is typical of a cryptocurrency project, warrants a completely new approach from regulators.
You are wrong. You have to regulate crypto differently. Tokens are distributed globally on decentralized blockchain networks. Many other countries treat cryptos as virtual currency while you want them to be securities to line your pockets and gain more power. you should quit!
— Tony Edward (Thinking Crypto Podcast) (@ThinkingCrypto1) 22 August 2022
Currently, there is a tug of war between the SEC and the Commodities and Futures Trading Commission (CTFC) over the regulation of digital assets. It is proposed that cryptocurrencies that qualify as commodities fall under the CTFC.
