SEC Chairman Gary Gensler confirmed that most cryptocurrencies except Bitcoin (BTC) can be classified as securities in an interview recently. He also warned that many crypto companies are violating Fed rules such as mixing customer funds and creating many conflicts of interest.
This statement was made by Mr. Gensler in the context of the SEC’s continuous legal actions to deal with individuals and organizations involved in serious crashes in the cryptocurrency market in 2022.
This move comes amid the SEC’s push to investigate various coins and crypto projects. Good examples include FTX and FTT tokens, Terraform Labs and Do Kwon, Mango Markets and Hacker Avraham Eisenberg’s MNGO tokens, Kraken with staking, Genesis and Gemini with lending. They also previously sued Paxos, the issuer of Binance’s stablecoin BUSD, and blocked Binance US’ acquisition of Voyager.
The chairman affirmed that the SEC has all the necessary tools to regulate the cryptocurrency market. Mr. Gensler also presented his view on the aspects that need to be monitored, according to which all cryptocurrency transactions are under the control of the SEC, except spot trading for Bitcoin and buying activity selling products and services using cryptocurrencies as payment methods.
Mr. Gensler explained: “SEC will regulate all (cryptocurrency) except Bitcoin. In other crypto projects, you can find websites, see the entrepreneurs behind them, they can register a company in a tax haven, can set up an operating organization, and have a lawyer to hide their control over the project.
They can issue the token outside of the US before giving it to US investors. But in essence, these tokens are securities because there is an institution in the middle and the public expects the profits to be generated from that organization’s activities.
Bitcoin, in the above understanding, cannot be considered a security because the founder has long since left the project, leaving management in the hands of the community. Bitcoin also does not have an intermediary organization to coordinate activities in the network, not even a prominent developer to guide the community.
The SEC Chairman warned crypto companies that have not yet registered with the Securities and Exchange Commission that “time is running out.” Mr. Gensler said many crypto companies are providing services that are behind the scenes “mixing up customer funds and full of conflicts of interest”. These products under traditional financial regulation would certainly not have been licensed for release to the public. In addition, many companies are taking on multiple roles at the same time, from exchanges, lenders, market makers, brokers, investment advisors, and asset custodians.
“There are regulations to prevent such conflicts of interest in the traditional finance, stock market, and commercial banking industry, and should not be allowed to occur in crypto as those crypto companies are not currently compliant. securities regulation,” Mr. Gensler said.
When asked about the actual economic-financial benefits of cryptocurrencies, President Gensler said that crypto has always been praised for two aspects: storing data using blockchain and storing value/payment in money. encode.
Regarding the application of blockchain, Mr. Gensler acknowledged that this is an important technical invention, helping to preserve information transparently, and resistant to censorship and attack, although the need to use it at present is not yet High. However, as for the money-making function, the SEC Chairman expressed skepticism.
“History from ancient times to the present has taught us that economies often operate around a certain currency. Having a single measure of value and trading instrument creates an effective network effect.
I don’t think using a more micro-currency will help the economy, and in fact, we haven’t seen such an example in centuries. Most of the current crypto tokens will fail anyway, because of their economic nature they are nothing.”
Since its inception, the crypto market has grown into a trillion-dollar industry, with Bitcoin accounting for almost 42%, while Ethereum has a market dominance rate of around 18.5%. The rest goes to altcoins, including stablecoins.
However, Bitcoin’s market share, especially in the US will spike in the coming years as regulations favor its adoption.