Securities and Exchange Commission Chair Gary Gensler spoke at the Piper Sandler Global Exchange and Fintech Conference on Wednesday. One of the topics Gensler discussed in the Q&A session was cryptocurrency regulation.
Crypto Regulation Bill: This week, Sens. Cynthia Lummis (R-Wyoming) and Kirsten Gillibrand (D-New York) unveiled new legislation that could potentially exempt cryptocurrencies from certain financial regulations, a bill draft that many crypto enthusiasts see as friendly to the industry.
On Wednesday, Gensler said he hasn't read the bill at this point, but has worked closely with both senators in the past. Gensler said he would discuss any commentary he has regarding the proposals in the bill with Lummis and Gillibrand directly.
"This speculative asset class, one and a quarter trillion roughly dollars right now, does not have the investor protection that the public needs, and I would contend if this field has any future, what the field needs as well," Gensler said.
Gensler On Issuer-Based Securities: Gensler noted that many stablecoins are similar to securities, and the SEC is committed to keeping investors safe and combatting crypto's role in facilitating illegal and prohibited activities.
"Most of the tokens, thousands of tokens, have an entrepreneur in the middle or a group of entrepreneurs in the middle raising money from the public, and the public is anticipating profits based on that. That's the core of the definition of an issuer-based securities regime," Gensler said.
He said regulation of issuer-based securities was what the SEC was originally tasked to do back in the 1930s.
"Most of these tokens are actually right now, I'm not prejudging any one of them, right now they're investment contracts, they're securities," Gensler said.
He also called on cryptocurrency trading platforms to work with the SEC closely in setting up the appropriate regulatory frameworks.
"Basically, we've got these projects: registered crypto markets, registered crypto intermediaries and yes, registered tokens. We are also looking very closely at the stablecoins because, franky, they look a lot like funds in how they're operating," Gensler said.
He said stablecoins regularly offer yields or rewards, similar to funds. Yet Gensler said Bitcoin (CRYPTO: BTC) does not function like a fund.
"Some of the tokens are commodities, Bitcoin being one of them," he said.
Message To Crypto Exchanges: In closing, Gensler had a message for crypto platforms and exchanges looking for regulatory clarity.
"Work with us, come in, because otherwise you've got securities floating on your platforms and you're right now operating outside of the law. We have a robust examination and enforcement unit, it's half of our staff at the SEC … Some of the traditional incumbent exchanges that are not yet there, they're working with us, so the crypto exchanges that are potentially operating outside of the law, it would be better to work with us too," he said.