Gensler Stands Firm on Crypto Concerns Before Senate Testimony

Police & Regulations
Sep 12, 2023 at 10:49 am

Despite recent setbacks in the court for the Securities and Exchange Commission, Chair Gary Gensler is standing firm in his criticism of the industry. The Chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, is reinforcing his reservations about cryptocurrencies. This comes after another setback in the SEC's extensive legal battle with the industry.

Following significant rulings in the Ripple case that boosted crypto proponents and an even more pronounced setback in the SEC's dispute over the Grayscale bitcoin ETF, Gensler is emphasizing the need for caution in the crypto sector regarding compliance with securities laws. These points are outlined in his written testimony, which is slated for presentation to the Senate Banking Committee.

Gensler remarked, "Given this industry's widespread noncompliance with the securities laws, it's not surprising that we've seen many problems in these markets." This statement was released on Monday, just before the routine SEC oversight hearing. During the hearing, Gensler will reiterate a common theme: "The vast majority of crypto tokens likely meet the investment contract test." He will further emphasize that since most crypto tokens fall under securities laws, most crypto intermediaries must also adhere to these regulations.

The recent court ruling in the Ripple case argued that the way Ripple distributed tokens to retail consumers did not violate securities laws. While the SEC is appealing this decision, it's likely that several other crypto companies facing lawsuits from the regulator will cite it in their own motions for dismissal. However, in a recent ruling against Terraform Labs, at least one other judge in the same court rejected the Ripple judgment.

While Gensler will highlight recent enforcement actions and discuss two of the agency's rule proposals affecting crypto firms one concerning custody and the other redefining exchange definitions to formally include crypto platforms he will also inform lawmakers that he won't be able to discuss any "active, ongoing litigation." This could potentially exclude topics of great interest to the industry, such as the SEC's high-profile cases against Coinbase and Binance.

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