• SEC Chair Gary Gensler recently sued Binance and Coinbase, asserting that cryptocurrencies are securities.
• Crypto tokens must be registered with the SEC or meet requirements for an exemption.
• Gensler described the current cryptocurrency scene as “Hucksters. Fraudsters. Scam artists. Ponzi schemes”
Cryptocurrencies Must Meet Regulatory Requirements
The U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler recently announced that all cryptocurrencies must meet regulatory requirements before being offered to investors or seek exemptions from the agency. He asserted that these digital assets class are securities, nothing less and exchanges listing them must also register themselves with the regulatory agency to comply with laws set out by Congress.
Gensler’s Comments on Cryptocurrency Scene
Gensler further commented on the current state of cryptocurrency market, describing it as reminiscent of time before federal securities laws came into being; a time full of “Hucksters. Fraudsters. Scam artists and Ponzi schemes”. This statement was made during his remote address at Piper Sandler Global Exchange and FinTech Conference in New York City on June 8th 2021 about the need of registering crypto tokens with SEC or meeting requirements for exemption from it in order to ensure public trust in capital market is not undermined by cryptocurrencies.
Investment Contracts Test
Gensler explained that Congress has included a long list of 30-plus items in definition of security including term ‘investment contract’. According to him, majority of crypto tokens meet this investment contract test and thus require registration with SEC if they are to be offered to investors or meet qualification criteria for seeking exemptions from it.
Lawsuits Against Binance & Coinbase
The SEC Chair drew attention when he launched lawsuits against two leading cryptocurrency exchanges – Binance & Coinbase – raising concerns about their operations complying with U.S securities law regulations or not in May 2021 after which he made clear his intentions regarding digital assets class being treated as securities under law and need for proper registration process before offering them to investors or seeking exemptions from it .
To conclude, Gensler emphasized on importance of following legal framework set up by Congress regarding offering cryptocurrencies as investments while ensuring public trust in capital market is not undermined due to lack of compliance from industry players who may try taking advantage of unregulated environment created by this nascent space .