Following the publication of the testimony by the chairman of the Securities and Exchange Commission (SEC), Gary Gensler, the Cryptoverse is arguing that the regulator may be planning to close the doors to (almost) all cryptocurrency exchanges unless they register with them – with the exception of those that only offer bitcoin (BTC) and ethereum (ETH).
Gensler is scheduled to testify before the United States Senate Committee on Banking, Housing, and Urban Affairs today, and his testimony has been made accessible to the public in advance of his appearance.
When it comes to cryptocurrency right now, Gensler compares it to the Wild West or the old world of “buyer beware” that existed before securities regulations were put in place, according to the attorney.
“Fraud, frauds, and misuse are rampant in this asset class, particularly in certain applications.”
The Securities and Exchange Commission (SEC) is considering a “number of projects” to protect investors in the cryptocurrency market, including crypto trading and lending platforms, the offer and sale of cryptocurrency, custody, investment vehicles that provide exposure to cryptoassets/crypto derivatives, and “stable value coins.”
Many platforms have a large number of tokens on them, and “the possibility is extremely distant that any individual platform has zero securities,” according to the Chairman, who added that a platform with 50, 100, or 1,000 tokens would have zero securities. Gensler said:
“Make no mistake: To the extent that there are securities on these trading platforms, under our laws they have to register with the Commission unless they qualify for an exemption.”
According to Gensler, the SEC is collaborating with the Commodity Futures Trading Commission (CFTC), the Federal Reserve, the Department of Treasury, the Office of the Comptroller of the Currency, and others on this issue as well as a larger set of regulatory frameworks.
These statements have been received positively by the cryptoverse so far, with Jeremy Hogan, a partner at Hogan & Hogan, opining that what Gansler’s words mean is that exchanges are selling securities, which the SEC believes to be securities, and that the SEC is coming after these companies without first issuing “warning shots or ‘clarification,'” as Hogan put it.
“I don’t believe the markets have really grasped the ramifications of Gensler’s statement,” said Arturo Portilla, a tax and fintech lawyer, who stated:
“There are only 2 cryptos US exchanges may feel comfortable with: BTC & ETH. Listing ANY other crypto could convey the need for the exchange to register before the SEC.”
Additional commenters saw Gensler’s statements as meaning that the regulator is specifically targeting alternative currencies, or “shitcoins,” as some have dubbed them. A number of cryptocurrency detractors contend that many cryptocurrencies are in fact scams or securities, and that the Securities and Exchange Commission (SEC) would be justified in shutting down their operations.
The counter-argument is that regulation should either be ubiquitous or absent altogether: altcoins cannot be controlled while Bitcoin and Ethereum remain beyond the jurisdiction of the Securities and Exchange Commission (SEC).
Many others have asserted that the laws itself is the source of the problem, or rather, that there is a lack of clarity in the legislation, as registering would not be an issue if the rules were more clearly written and understood. Meanwhile, bitcoin trader and economist Alex Krüger has argued that both technology and legislation must adapt in order for the two to live effectively in the modern world.
Others pointed out that if coins were listed in the United States, they could simply be listed in another country if they were listed in the United States, raising the question of whether the markets would truly respond to the decision of a US regulator. Although many people believe that other countries could benefit from the United States’ example, this is not universally agreed upon. Including the term “stable value currency” was yet another factor that grabbed the attention of the Cryptoverse, with many speculating that it is a move toward more severe crypto exchange regulation, in addition to a means of controlling the narrative.
According to Crypto Law Review, “whoever came up with the concept of a “stable value coin” deserves a raise, then should quit and establish a cryptocurrency company.” Besides fiat-pegged “stable”coins, they’re aiming for the ultimate prize: a commodity-backed cryptocurrency that denies ownership and relies on no central bank. “Talk about the power of narrative control,” says the author.
Aside from the fact that Gensler encouraged platforms and projects to “come in and talk to us,” some comments indicate that other companies have attempted this and failed horribly. As a result, the SEC is addressing Ripple specifically because the company is still embroiled in a protracted and difficult legal battle with the government, which has accused Ripple executives of “knowingly” selling XRP as a “unregistered security.”