Gensler: Some stablecoins might be securities illegally sold on crypto exchanges
On Tuesday morning, the Senate Banking Committee heard from Chair of the Securities and Exchange Commission Gary Gensler about the SEC’s efforts relating to cryptocurrency regulation.
- Gary Gensler discussed latest developments in crypto with Senate Banking Committee
- The SEC chair thinks that some stablecoins qualify as securities.
- SEC chairman says Coinbase might have dozens of tokens that could be securities
In response to a query from Sen. Pat Toomey, Gary Gensler, the chairman of the United States Securities and Exchange Commission, stated that stablecoins “may well be” securities during an ongoing hearing before the U.S. Senate Banking Committee.
Gensler says that there is only “a small number” of cryptocurrencies that are commodities, while “very many” of them could be classified as securities.
Gensler added that, in his opinion, there is a great deal of regulatory uncertainty surrounding crypto since the U.S. Congress has to make legislative changes: “I think it’s up to the US Congress to change the legislation.”
“This Congress could change the laws, but the laws that we have right now have a very broad definition of a security.”
Gensler further observed that non-traditional investment vehicles, such as scotch whiskey, may be securities. This demonstrates how the Howey test, which is used to determine if a specific asset is an investment contract, can be interpreted by courts.
In one particularly intense discussion, Senator Warren attacked crypto’s promises of financial inclusion. “We hear a lot about how crypto is all about financial inclusion,” she said. “I want to test out with you if crypto is an improvement over the financial system.”
Referring to last week’s crash, Warren said: “In a matter of hours, $400 billion in market value just disappeared.” She ran through a scenario involving an hypothetical retail investor who had lost all of his money after making a Monday-night investment. That investor would need to withdraw in such circumstances, and crypto exchanges like Coinbase might be down for a time.
That investor, Warren and Gensler agreed, would have no recourse, as there is no federal regulatory regime for crypto exchanges. Gensler railed against Coinbase as the most significant security concern, siding with Warren’s positioning that cryptocurrencies are not immune from anti-security regulations. Gensler particularly focused on Coinbase, denouncing their noncompliance with registration requirements “even though they have dozens of tokens that might be securities.”
Despite his tough attitude on the sector, Gensler made it clear that he was not against cryptocurrency.
“I’m not negative or a minimalist about crypto…I just think it’s best if it’s inside the investor protection regime Congress laid out.”
The chairman of the Securities and Exchange Commission (SEC) has stated that the crypto industry must adapt to new rules if it wants to remain relevant.