On April 18, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler appeared in the latest House of Representatives Committee on Financial Services hearing, the first of its kind in 18 months.
Gensler remained cool, calm, and collected even as he was subjected to a barrage of criticism, mostly from the GOP side, for refusing to budge on his position that existing securities laws apply to the digital currency industry.
In a somewhat contradictory flood of complaints, Gensler came under fire for not being clear about regulations and making too many of them too quickly. Yet, even in the eye of the storm, the SEC Chairman patiently reiterated his long-held position that existing financial regulations and existing laws created by Congress apply and always have. While many industry media outlets portrayed him as confused and out of touch, truthfully, he was anything but and remained steadfast throughout.
After the hearing, digital currency influencers moaned on Twitter about Gensler, and Rep. Warren Davidson (R-OH) even went as far as to call for Gensler’s removal from his position as SEC chairman.
It’s yet another example of the all-too-common overreactions within the industry upon being told the laws and rules of a Democratic nation apply to them.
gary gensler is such a little bitch
— Tiffany Fong (@TiffanyFong_) April 19, 2023
Great, well-reasoned, and highly logical points there, Tiffany!
Gensler is right, and ‘crypto bros’ are wrong
To anyone half-educated or sane, it’s not a big surprise that the head of the SEC is right about laws related to securities, while ideological fanatics who have fundamentally misunderstood Bitcoin are wrong. Yet, here we are.
When new industries emerge, it’s always the case that regulators have to find the right balance between innovation and protecting customers. However, this does not mean that governments have to compromise on applying existing laws when new industries violate them.
Whether Gensler is right that most digital currencies are securities remains to be seen and will be settled in court, but using the Howey Test, it’s difficult to see how he’s wrong. In any case, he’s right that regulations and restrictions protect customers from the bad actors in the industry; just look at how Japanese rules helped protect citizens of that country from the FTX fallout.
Speaking of Japan, the rules of that country plainly illustrate how industry players aren’t being remotely honest when they plead for regulatory clarity. Not only has Gensler been 100% consistent and clear about the fact that existing rules apply from day one of his chairmanship, but exchanges like Coinbase (NASDAQ: COIN) pulled out of Japan, which has crystal clear regulations.
What these digital currency exchange bosses really mean is they want favorable regulations that allow them to peddle unregistered securities to the unsuspecting public as they pump and dump them on naive speculators who have bought into the idea they’re part of a financial revolution. To Gensler’s credit, his words and deeds show that isn’t going to happen on his watch.
Whether digital currency exchange bosses like Brian Armstrong and Jesse Powell like it or not, they will have to play within the bounds of the laws of the nations they operate in, and where they have broken them, they will have to pay the piper.
All the complaints and disingenuous appeals are just tactics to delay the inevitable collision with the regulatory meteorite headed their way. All the lobbying dollars they’ve pumped into the pockets of morally flexible congressmen and senators are unlikely to save them.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
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