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In his June 8 speech at the Piper Sandler Global Exchange & Fintech Conference, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler compared the current cryptocurrency market to the U.S. stock market of the 1920s, saying it was full of “traders.” scammers” and “Ponzi schemes”. He argued that just as Congress cleared the stock market by passing securities laws, the current SEC can also clean up the cryptocurrency market by enforcing these laws.
JUST IN: SEC Chair Gary Gensler says cryptocurrency is all “hucksters, fraudsters, scam artists.” pic.twitter.com/1xRWUMzbel
— Milk Road (@MilkRoadDaily) June 8, 2023
In his speech, Gensler praised the Securities Act of 1933 and the Securities Exchange Act of 1934, arguing that these laws allowed US securities markets to “thrive” for the next 88 years. He argued that today’s “cryptocurrency securities markets” should also benefit from these laws, as they are “no less deserving of the protection” they provide.
Pointing to the court decision against Telegram Open Network, Gensler argued that crypto asset securities are not exempt from securities laws, even if they are useful.
“Some promoters of cryptocurrency asset securities claim that their token performs a function that goes beyond a simple investment vehicle,” Gensler said. from the definition of an investment contract”.
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This means that cryptocurrency securities exchanges must comply with securities laws, including the requirement to separate “exchange, broker-dealer and clearing functions,” Gensler said. In his opinion, such separation “helps to mitigate the conflicts that can arise when mixing such services.”
Gensler denied that such a separation was possible, saying that separating the three functions simply required work.
The head of the SEC argued that the current cryptocurrency market is rife with fraud that has arisen from the industry’s non-compliance with securities laws, stating:
“Frankly, with widespread non-compliance, it’s not surprising that we see a lot of problems in these markets. We have already seen this story. This is reminiscent of what it was like in the 1920s before federal securities laws were passed. Merchants. Fraudsters. Fraudsters. Ponzi schemes.
The solution, according to Gensler, is to make sure issuers of crypto-currency securities comply with the law. This is because such frauds are “more likely to occur in markets where issuers and intermediaries do not comply with fundamental laws.”
As chairman of the SEC, Gensler has come under fire in the cryptocurrency industry, especially after the SEC filed lawsuits against cryptocurrency exchanges Binance and Coinbase. Critics say it has a too broad view of the SEC regulator and is pushing innovation out of the US.