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The vast majority of crypto tokens in circulation are securities that should be overseen by the Securities and Exchange Commission, Chairman Gary Gensler will say in a speech Monday, according to prepared remarks
“The fact is, most crypto tokens involve a group and entrepreneurs raising money from the public in anticipation of profits — the hallmark of an investment contract or a security under our jurisdiction,” he’ll say during a speech at the Penn Law Capital Markets Association Annual Conference.
“Some, probably only a few, are like digital gold; they may not be securities,” Gensler added, likely referring to bitcoin
BTCUSD,
the most popular crypto token, which Gensler has argued, prior to joining the SEC, should be regulated like a commodity. Previous SEC officials have argued that ether
ETHUSD,
should also be seen as a commodity, though there has been no official guidance on the question, and Gensler suggested, as a private citizen, it could be viewed as a security.
Many issuers of cryptocurrencies have not registered with the SEC as securities issuers, despite Gensler’s repeated argument that most digital tokens are under its jurisdiction. Gensler’s predecessor, Jay Clayton, has also argued that the issuers of crypto tokens have been delinquent in not registering with the agency.
The SEC has jurisdiction over those who issue securities to raise money from the general public, while the Commodity Futures Trading Commission oversees derivatives markets based off commodities markets. The CFTC does not, however, oversee the spot markets for commodities. Therefore a market for digital assets deemed to be commodities would not be regulated like markets for stocks, bonds, or derivatives like options and futures.
CFTC Chairman Rostin Behnam has argued that Congress should pass a law giving his agency oversight of digital asset spot markets, though this would not resolve the debate over which digital assets are securities and which are commodities.
Gensler also reiterated his intention to bring greater regulatory scrutiny to cryptocurrency exchanges like Binance, Coinbase
COIN,
and Kraken. He said that he has directed staff to work on “getting the platforms themselves registered and regulate much like exchanges.”
“These crypto platforms play roles similar to those of traditional regulated exchanges,” Gensler added. “Thus, investors should be protected in the same way.”
In an interview with MarketWatch in February, Gensler warned that a failure by exchanges to register with the agency could lead to fines or other penalties. “We’ll continue to pursue [enforcement actions], based on the facts and the law, wherever that takes us,” he said.
