SEC Chair Gary Gensler Threatens Action On Unregistered Crypto Exchanges

May 19, 2022 2:31 pm

As SEC Chair Gary Gensler testified before a Congressional subcommittee, he once again made the warning that all crypto exchanges should be registered in order to stay compliant regulations.

He stated that failure to register these businesses could put them at risk of future enforcement actions by the committee.

This response was given when Congress was questioning the SEC for why there was no clear set of guidelines when it comes to the regulation of cryptocurrencies.

To provide some context, several members of Congress had previously submitted a letter to the SEC which requested answers for the SEC’s recent regulatory actions for the crypto industry.

Decrypto.co reports:

The SEC has, to date, brought more than 80 enforcement actions against crypto asset offerings and platforms. Gensler argued on Wednesday that such actions were well within his agency’s purview, saying,

“I think the rules are actually quite clear that if you’re raising money from the public, and the public anticipates a profit based on the efforts of that sponsor, that’s a security.”

But the situation may not be so simple.

Historically, the SEC has not clarified which crypto assets it classifies as securities, versus some that it’s said could be considered commodities (and thus outside its jurisdiction).

In the same congressional session Wednesday, Gensler referred to Bitcoin as a commodity: “Bitcoin, maybe that’s a commodity token.”

Due to the blurred lines posed by cryptocurrencies and crypto assets, many crypto firms fined or subpoenaed by the SEC have expressed frustration at doing their best to follow poorly articulated laws only to later face legal repercussions.

A new regulation process is also in progress that may involve both the SEC and the CFTC playing specific roles when it comes to regulation for crypto.

During the congressional subcommittee, the topic of funding for the SEC had also come up.

Gensler pushed for an increase in budget which would likely be needed in order to support the SEC’s announcement that they would double the amount of staff on their crypto enforcement division.

The claim here is that this additional staff would allow the agency to better protect investors from risk, but has faced much backlash from the crypto community as many saw it as an excuse for over-regulation.

Decrypto.co concludes:

Earlier this month, the SEC announced it was expanding its newly rebranded Crypto Assets and Cyber Unit to over 50 personnel.

In his testimony today, Gensler claimed additional resources would be required to protect crypto consumers from unprecedented risk, alluding to the stunning collapse last week of Terra’s algorithmic stablecoin, UST, and native token, LUNA.

“There was one crypto complex that went from like $50 billion to near-zero just within the last three weeks,” warned Gensler. “These are highly speculative, volatile, and—I would daresay often—the public is not protected.”

SEC Commissioner Hester Pierce had also greatly opposed the idea of increasing the number of staff, but it seems that its not stopping the SEC from continuing to target more and more crypto businesses.

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