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The rise of cryptocurrencies has spurred questions about when the Securities and Exchange Commission will unveil regulations specifically aimed at crypto. SEC Chair Gary Gensler says the relationship between the regulator and the cryptocurrency industry is actually a simple one.
In a new interview for Influencers with Andy Serwer, the influential SEC chair explained why he views existing law as “straightforward” when it comes to exercising broad influence on issues from a potential spot Bitcoin ETF to the regulation of cryptocurrency platforms more broadly.
Gensler is currently urging the biggest cryptocurrency exchanges — like Coinbase (COIN), BlockFi, and others — to voluntarily register with the SEC. But he says “the law is clear” on that issue. “It's a question of whether they're registered or they're operating outside of the law and I'll leave it at that,” he said.
Gensler also pointed to the recently settled case against BlockFi for $100 million over its cryptocurrency interest account as an example of why these companies “must comply with time-tested securities laws.”
This week's comment come as some crypto companies — as well some of his fellow commissioners — offer differing views of when and how the SEC will dive into regulating the industry.
SEC Commissioner Hester Peirce recently told Yahoo Finance that she does not anticipate the commission introducing direct crypto regulation this year. In the absence of direct regulation, she suggests applying the so-called Howey test — which determines whether to classify an asset as a security — to digital assets. However, she hinted that the agency might regulate crypto tokens differently from other assets.
“It gets a little more difficult because the token works in a different way than some of these other assets do; and the information that you might want about that token is a little bit different than you might want about other kinds of assets,” Peirce told Yahoo Finance.
For his part, Gensler notes the SEC needs to protect those dealing on crypto exchanges. "It's every bit as important to have investor protection for crypto exchanges, for the lending platforms where people are transacting, buying, and selling crypto tokens, and have appropriate disclosure about the tokens themselves and protect the public from fraud and manipulation.”
He didn’t offer a timeline for new regulations of the exchanges during this week’s conversation but has previously focused on getting it done in 2022.
‘Continue to consider the proposals’ for a Spot Bitcoin ETF
On the issue of a Spot Bitcoin ETF, which many investors eagerly await, Gensler stuck with his policy of not commenting on proposals currently before the SEC. Still, he said he wouldn’t approve any specific ETF until the review process was complete to minimize the chances of “lies going on.”
Last year, in a landmark moment, Gensler and the SEC approved an ETF based on Bitcoin futures. However, he has moved more slowly on vehicles for investing in the current price of tokens. Critics of the futures ETF structure would like a wider investor base to be able to invest in current prices.
In a recent letter to Congressman Tom Emmer, a Minnesota Republican, Gensler underlined that the review process was ongoing. The SEC continues "to consider the proposals to list and trade these products," he wrote, without giving a timeline.
We received a response from SEC Chair Gensler to our 11/3/21 letter regarding BTC spot ETFs. This issue remains a priority for us and we will continue to oversee the SEC in its mission to maintain fair and orderly markets and facilitate capital formation. pic.twitter.com/WbgSDj7o0T
— Tom Emmer (@RepTomEmmer) February 17, 2022
Either way, Gensler has repeatedly promised to scrutinize ETF proposals. “If you're raising money from the public, and the public's anticipating some profit based on the efforts of those folks raising the money, that comes within the definitions of a security and the securities laws,” he said.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.