In a speech at the Piper Sandler Global Exchange & Fintech Conference, SEC Chairman Gary Gensler said the cryptocurrency market is full of dishonest traders and fraudsters. According to him, Congress “cleaned up” the market with the Securities Act of 1933 and the Securities Exchange Act of 1934, allowing the U.S. securities markets to flourish for the next 88 years. The SEC can do the same by applying these laws to cryptocurrencies, and cryptocurrency companies, in turn, should try to benefit from these laws, Gensler argues.<br
“With such a wide range of compliance violations, it’s not surprising that there are many problems in the cryptocurrency market. We already know this story. Cryptocurrencies now resemble the market in the 1920s, before the federal securities laws were passed: traders, crooks, Ponzi schemes,” Gensler said.
The SEC chief noted that in addition to issuers of digital assets, crypto exchanges are also required to comply with securities laws. This includes requirements to separate asset exchange, clearing, and broker-dealer services. This separation of functions will eliminate possible misunderstandings and confusion, said Gensler. The SEC chairman also mentioned the court’s decision in the Telegram Open Network (TON) case, noting that cryptocurrencies are not exempt from securities laws, even though they may be of some use.
“Some securities promoters argue that their token performs a function beyond that of a mere investment instrument. However, as seen in the outcome of the Telegram Open Network litigation, the utility of these tokens does not invalidate their definition as an investment contract,” Gensler said.
The cryptocurrency community has strongly criticized Gensler and the SEC for their tough approach to cryptocurrencies, especially after the regulator sued major cryptocurrency exchanges Binance and Coinbase. Proponents of cryptocurrencies are outraged that the SEC is driving innovation out of the U.S.
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