Gary Gensler underscores the importance of adhering strictly to existing US securities law, particularly the Securities Act of 1933, within the crypto industry. He emphasized that these laws are intended to protect investors and uphold fair, orderly, and efficient markets.
“There’s a clear set of rules in place. Crypto securities align with securities laws,” he affirmed.
Gary Gensler has highlighted significant compliance issues within the crypto industry, noting that many tokens and platforms are failing to adhere to securities laws and provide necessary disclosures to investors, which poses risks to the public.
He emphasized that relocating operations abroad does not exempt crypto companies from complying with US securities laws. Gensler stressed the importance of proper disclosure and compliance regardless of where operations are based.
“If they are truly transparent, making proper disclosures, and registered as required, and if intermediaries are operating lawfully without conflicts,” he stated.
Additionally, Gensler criticized the perceived decentralization of many platforms, arguing that they are actually highly centralized and operate with conflicts of interest.
“The law prohibits trading against customers while operating an exchange, and engaging in activities resembling investment contracts or securities, and benefiting from listing,” he outlined.
Gensler’s position on applying securities laws to the crypto industry is notable, especially amid calls from industry leaders for regulatory clarity. For instance, in May, Charles Hoskinson, co-founder of Ethereum (ETH) and Cardano (ADA), criticized the notion of regulating crypto under existing securities laws as “absurd.” Hoskinson’s remarks reflect ongoing debates within the industry about the compatibility of current securities regulations with cryptocurrency characteristics.
“Cryptocurrencies can embody characteristics of commodities, securities, currencies, loyalty points, and non-fungible tokens, all simultaneously. So, how do you regulate these assets when their classification can change daily, weekly, or monthly? Circumstances can indeed evolve over time,” explained Hoskinson.
In the same interview, Gensler clarified the SEC’s position on crypto exchange-traded funds (ETFs). The recent approval of spot exchange-traded products represents a significant step forward. These products offer regulated avenues for crypto investment, contrasting sharply with non-compliant platforms where much of the crypto trading currently takes place.
He also addressed the approval of spot Ethereum ETFs, underscoring the rigorous scrutiny involved to ensure compliance with all regulatory requirements. This approach aims to offer a safer investment option for the public.
“I cannot pinpoint the timing, but the process is progressing well. It’s primarily about asset managers providing comprehensive disclosures for registration statements to become effective, ensuring clarity for legal compliance,” he explained.
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