SEC Delivers Tough Love to Crypto

The crypto industry might want to remember the adage: “Be careful of what you wish for because you might get it.”

For several months now the industry has been asking for clear rules from one of the most powerful financial-market regulators. The reasoning has always been: We need clear rules so all players know what they can and can’t do.

And on several occasions the U.S. Securities and Exchange Commission has dodged the issue, instead just giving clues by sanctioning bad actors or fighting publicly with others.

Now, the federal agency’s chairman has just given leads to its thinking, and they will not please the industry, which is currently slogging through what it calls the crypto winter, a period marked by falling cryptocurrency prices.

Most Cryptocurrencies Are Securities: Gensler

SEC Chairman Gary Gensler says most cryptocurrencies are securities and many of the platforms involved in the sector should register with the SEC.

“Of the nearly 10,000 tokens in the crypto market, I believe the vast majority are securities,” Gensler said in a Sept. 8 speech at an event organized by the Practising Law Institute in Washington. “Offers and sales of these thousands of cryptosecurity tokens are covered under the securities laws.”

Gensler’s reference is that crypto projects often issue tokens that enable them to attract investors and spotlight their work.

And putting his remarks simply, the majority of the crypto industry is currently operating illegally.

This isn’t the first time Gensler has deemed cryptocurrencies to be securities, but it’s the first time he’s deemed most of them to be.

A security is, according to the SEC, “an investment of money, in a common enterprise, with a reasonable expectation of profit derived from the efforts of others.”

Tokens, or coins, until now have not been considered securities. This meant that they escaped strict regulatory supervision and were not subject to the same rules of financial transparency and disclosure, as, for example, shares in a company would be. The listing process for tokens iss also less strict than that for a security.

The SEC chairman has recognized that certain tokens, including bitcoin, might not be considered securities.

“A small number of crypto nonsecurity tokens (…) may not be securities,” Gensler said. “Bitcoin, the first crypto token, is referred to by some as ‘digital gold’: trading like a precious metal, a speculative, scarce — yet digital — store of value.”

Source: The Street

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