SEC Chairman Testifies In Front Of U.S. Senate Banking Committee.
As reported by The Crypto Basic SEC’s chair Gary Gensler was to testify in front of the U.S. Senate Banking, Housing, & Urban Affairs Committee Majority on September 15, 2022.
Here is what Gary Gensler Said about crypto Before the United States Senate Committee on Banking, Housing, and Urban Affairs:
“The core principles from the securities laws apply to all corners of the securities markets.20. Investors and issuers in crypto markets ought to benefit from the same gold standard that has made our capital markets the most liquid and innovative in the world.
Of the nearly 10,000 tokens in the crypto market, I believe the vast majority are securities. Offers and sales of these thousands of crypto security tokens are covered by the securities laws, which require that these transactions be registered or made pursuant to an available exemption. Thus, I’ve asked the SEC staff to work directly with entrepreneurs to get their tokens registered and regulated, where appropriate, as securities. Given the nature of crypto investments, I recognize that it may be appropriate to be flexible in applying existing disclosure requirements.
Stablecoins have features similar to, and potentially competing with, money market funds, other securities, and bank deposits. Currently, they are primarily used as means to participate in, or as so-called settlement tokens inside of, crypto platforms. Depending on their attributes, such as whether these instruments pay interest, directly or indirectly, through affiliates or otherwise; what mechanisms are used to maintain value; or how the tokens are offered, sold, and used within the crypto ecosystem, they may be shares of a money market fund or another kind of security. If so, they would need to register and provide important investor protections.
Given that most crypto tokens are securities, it follows that many crypto intermediaries whether they call themselves centralized or decentralized (e.g., DeFi) — are transacting in securities and have to register with the SEC in some capacity. I’ve asked staff to work with crypto intermediaries to ensure they register each of their functions — exchange, broker-dealer, custodial functions, and the like — which could result in disaggregating their functions into separate legal entities to mitigate conflicts of interest and enhance investor protections.
I also have asked staff to work with firms that have been operating in other well-regulated markets that want to enter the crypto market. Such traditional financial intermediaries have expressed an interest in providing services to investors in the crypto market and to do so in compliance with time-tested investor protection rules. Existing crypto security intermediaries need to do so in compliance with investor protection rules as well.21 All intermediaries in our capital markets deserve to compete — and comply — on a fair playing field.
As I have stated previously, a small number of tokens likely are crypto non-security tokens, though they may represent a significant portion of the crypto market’s aggregate value. Thus, I have asked staff, in working to register crypto security intermediaries, to recommend a pathway to allow both the crypto security and crypto non-security tokens to trade versus or alongside one another. To the extent that crypto intermediaries may need to one day register with both the SEC and the Commodity Futures Trading Commission (CFTC), I would note we currently have dual
registrants in the broker-dealer space and in the fund advisory space.
I look forward to working with Congress on various legislative initiatives related to crypto markets, while maintaining the robust authorities we currently have. Let’s ensure that we don’t inadvertently undermine securities laws underlying $100 trillion capital markets. The securities laws have made our capital markets the envy of the world.”
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