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SEC Chair Keeps Heat on Crypto Exchanges

S.J. Steinhardt
Published Date:
Sep 8, 2022

Securities and Exchange Commission (SEC) Chair Gary Gensler remains determined to bring the cryptocurrency industry to heel by demanding that it abide by existing regulations covering exchanges, Marketwatch and Bloomberg reported.

The chair’s latest remarks signal his insistence that many in the industry violate federal laws governing securities by issuing tokens that qualify as such.

“The investing public is buying or selling crypto security tokens because they’re expecting profits derived from the efforts of others in a common enterprise,” he said in remarks prepared for the Practising Law Institute’s “SEC Speaks” series.

Using that simplified definition of a “security,” Gensler has long argued that the crypto exchanges and other intermediaries should be registered with the SEC as securities exchanges and broker-dealers.

“The public deserves the same protections from your clients that they get with other issuers of securities,” he said. “Not liking the message isn’t the same thing as not receiving it."

Gensler has previously said that crypto exchanges operate in “a legal gray area,” as Bloomberg reported. For example, crypto exchanges differ from stock exchanges in that they may offer both securities and commodities on the same platform.

“These are not laundromat tokens,” he said. “Promoters are marketing and the investing public is buying most of these tokens, touting or anticipating profits based on the efforts of others.”

To address the need for regulation, the SEC doubled the size of its Crypto Assets and Cyber Unit by adding 20 new positions since May.

The largest publicly traded crypto exchange, Coinbase Global Inc., is under investigation by the SEC, which brought charges in July against a former Coinbase product manager for insider trading, identifying nine tokens it alleges are securities, which were listed on the exchange. In February, the crypto lending platform BlockFI agreed to pay a $100 million for failing to register with the agency.

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