March 14, 2023

Crypto OpEd: Chair Gensler Weighs In

In a recent OpEd piece published in The Hill, SEC Chair Gensler calls on crypto firms to do their work within the bounds of the law, or they shouldn’t do it at all. Chair Gensler takes on arguments that crypto firms have advanced for avoiding regulation by the SEC and notes the importance of regulations to crypto markets. He notes:

First, intermediaries and tokens should properly come into compliance on their own. Crypto intermediaries should structure their businesses to comply with our laws governing securities exchanges, broker-dealers, and clearinghouses; they could put into place rulebooks that protect against fraud and manipulation. Crypto security issuers should file registration statements and make the required disclosures.

These are the same rules that everyone else in the securities markets has played by for decades.

I find the talking point that there’s a lack of clarity in the securities laws unpersuasive. Some crypto companies might message that the laws are unclear rather than admitting that their platforms don’t have sufficient investor protection.

We’ve been clear that most crypto tokens that are backed by entrepreneurs, among other features, are likely to be securities. We’ve been clear how lending and staking platforms come under the securities laws. We’ve been clear that platforms listing crypto securities must register with the SEC. Further, the securities laws are clear that these platforms are not to combine functions under a single umbrella that creates conflicts and risks for investors.

Chair Gensler goes on to defend the SEC’s enforcement activity in the crypto space, noting: “Enforcement is a tool, not the destination. The goal is to get market participants into compliance with laws and rules and to protect our ‘clients’: U.S. investors.”

– Dave Lynn