Gary Gensler had strong words for the crypto industry in a Thursday speech, telling an audience of lawyers that the “vast majority” of the nearly 10,000 existing crypto tokens are securities, issued to the public in violation federal laws.
“The investing public buys or sells crypto security tokens because they expect benefits from the efforts of others in a joint venture,” the Securities and Exchange Commission chairman said in prepared remarks, paraphrasing the definition of “security”. in American case law.
Gensler took aim at those in the industry who say current securities law is incompatible with cryptocurrencies and called for a new set of rules specifically designed for the industry.
He argued that through statements and dozens of enforcement actions, the SEC has made clear how existing law applies to the industry, and that no such rule is forthcoming.
“Not liking the message is not the same as not receiving it,” Gensler said.
“These are not laundromat tokens. Promoters are marketing and the investing public is buying most of these tokens, touting or anticipating profits based on the efforts of others,” he added.
Gensler said investors deserve disclosure to help them sort out which investments they think will thrive or flounder.
“Investors deserve to be protected against fraud and manipulation. The law requires these protections,” he said.
The SEC has bolstered its enforcement staff dedicated to protecting investors in the crypto market, announcing in May that it was adding 20 new positions in the new Crypto Assets and Cyber unit, nearly doubling its size.
Gensler specifically called out crypto exchanges and other intermediaries during his speech, arguing that they should be registered with the SEC as stock exchanges and broker-dealers.
Coinbase Global Inc. COIN,
the largest publicly traded crypto exchange, said in its latest quarterly report that the company is under investigation by the SEC and has received questions about how it chooses which digital assets to list and how it lists them. class.
The SEC filed a lawsuit in July against a former Coinbase product manager for insider trading, identifying nine tokens that it says are publicly traded securities. Coinbase said it disagreed with the SEC’s classification.
In February, crypto lending platform BlockFI agreed to pay $100 million for not registering with the agency.
Gensler said the SEC will have to come up with new procedures for registering crypto exchanges because they also offer custody and brokerage services, unlike typical stock exchanges.
Crypto exchanges also differ from stock exchanges in that they can offer both securities and commodities on the same platform, and Gensler said he asked staff “to consider how best we could allow” investors to trade both on the same exchange.