Speaking at the Financial Markets Conference, the SEC chair asserted that the rules for crypto are already in place and that the crypto sector has been largely non-compliant.
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The chair of the United States Securities and Exchange Commission, Gary Gensler, has hit back at Coinbase’s petition compelling the agency to provide a clear stance on crypto regulation, arguing that there are already adequate laws in place.
In a May 15 keynote speech at the Financial Markets Conference, Gensler was asked about the dispute with Coinbase, the rules on crypto and why “the SEC doesn’t publish rules for that market.”
In response, Gensler staunchly asserted that “the rules have already been published,” adding that:
“To make it quite direct: this is a field that has been operating largely non-compliant. […] There’s nothing about a new technology that makes it non-consistent with the public policies that congress has laid out.”
Gensler argued that the SEC has already put out the rules for what is required to custody assets, be an exchange, broker dealer or advisor and how to register securities offerings with the agency.
The SEC chair’s current view is that most crypto assets — apart from Bitcoin (BTC) — fall under the securities definition of an investment contract.
“If the public is investing money and anticipating profit based upon the efforts of others, in a common enterprise, that’s a security,” he said, adding:
“There’s financial intermediaries, nodes in the network, and they need to come into compliance if they’ve got securities on their platforms.”
Coinbase — and many other U.S. crypto firms — have repeatedly spoken out against an apparent lack of clear crypto regulation and the SEC’s so-called “regulation by enforcement” approach to crypto, along with its hostile nature when dealing with digital asset firms.
— Gary Gensler (@GaryGensler) May 15, 2023
In April, the firm went as far as to file an action in federal court seeking to compel the SEC to publicly disclose its stance on a petition from July 2022 calling for clear rules for the crypto sector.
Notably, the U.S. Chamber of Commerce has also echoed this call from Coinbase as it heavily criticized the SEC’s oversight via May 9 amicus brief.
“The SEC has deliberately muddied the waters by claiming sweeping authority over digital assets while deploying a haphazard, enforcement-based approach,” it stated.
Related: SEC under fire for its custody rule: Law Decoded, May 8–15
On May 8, the Coinbase chief legal officer Paul Grewal also sent a letter to the SEC requesting revisions to the agency’s proposed updates to its registered investment advisers custody rule.
Essentially, Coinbase argued that the proposals unfairly target crypto companies, provide a lack of nuanced rules for different asset classes and make improper assumptions about custodial practices based on securities.
Other players in the space such as Web3 venture capital fund Andreessen Horowitz (a16z) and the Blockchain Association have also echoed similar criticisms of the proposals.
Magazine: Crypto regulation — Does SEC Chair Gary Gensler have the final say?