Cryptoindustry experts in the field of law criticized the chapter SEC Gary Gensler for hints about the conformity of all digital assets, except for bitcoin, with the characteristics of securities.
On February 23, in an interview with New York Magazine, the official pointed out that investors’ expectations of profits based on the efforts of intermediaries give such a status to cryptocurrencies. The latter use a variety of complex and legally opaque mechanisms to attract buyers.
Industry experts were unanimous – the SEC does not have the appropriate mandate to control the new asset class.
Jack Chervinsky of the Blockchain Association emphasized that “Gensler’s opinion is not law”:
“The SEC has no authority to regulate any of them [цифровых активов] until she proves her case in court. For each individual.”
Chair Gensler may have prejudged that every digital asset aside from bitcoin is a security, but his opinion is not the law. The SEC lacks authority to regulate any of them until and unless it proves its case in court. For each asset, every single one, individually, one at a time.
— Jake Chervinsky (@jchervinsky) February 26, 2023
According to expert Logan Bollinger, the opinion of the head of the department from a legal point of view cannot have a final legal definition.
Friendly reminder that Gensler’s opinions on what is or isn’t a security are not legally dispositive.
In this country, judges — not SEC chairs — ultimately determine what the law means and how it applies.
Doesn’t mean his thoughts are irrelevant. They’re just not dispositive.
— Logan Bolinger (@TheWhyOfFI) February 26, 2023
“In this country, judges, not SEC chairs, ultimately determine what the law means and how it is applied. […] The Commission can initiate enforcement action and reach a settlement, but this is not a legal precedent. […] Howey test is itself a law passed by a judge. It was not developed by the SEC. […] Saying ‘yes, I think x, y and z are securities’ doesn’t legally mean that they actually are.” the lawyer explained.
Bitcoin Policy Institute Lead Jason Brett noted that Gensler’s statements “should not be praised, but feared” because “there are ways to win, except through the regulatory moat.”
The Gary Gensler thing is no bueno. There are ways to win other than via a regulatory moat. And anytime this is the way, the script can be flipped and before you know it, everyone is crying due process. Gensler’s comments in NY Magazine shouldn’t be celebrated, but feared.
— Jason Brett (@RegulatoryJason) February 26, 2023
“The script can be changed. Before you know it, everyone will start ‘crying’ about due process.” the specialist warned.
Delphi Labs General Counsel Gabriel Shapiro questioned the ability of the SEC to organize a mass of enforcement proceedings against industry players to “cement the rules.”
@coingecko puts the total crypto market cap at $1.13T, consisting of 12,306 tokens
BTC is $467B/~40% of that
ex hypothesi, this means 12,305 tokens/$663B in value are illegal in the US b/c they trade publicly as unregistered securitieshttps://t.co/JPGEkPp1XR. pic.twitter.com/lenBWW9JvY
— _gabrielShapir0 (@lex_node) February 26, 2023
“CoinGecko estimates the total cryptocurrency market capitalization at $1.13 trillion, consisting of 12,306 tokens. [Показатель] bitcoin – $467 billion, which is ∽40% of this. So 12,305 tokens worth $663 billion are illegal in the US because they are publicly traded as unregistered securities,” he calculated.
The expert noted that the SEC had previously acted in two ways:
- Fine + registration requirement (this failed every time companies went bankrupt).
- Fine + order to burn all pre-mined tokens and delist them from all exchanges.
The cases with the Kik / KIN and EOS projects stand apart. Then the SEC was limited only to the collection of fines. No other startup has received the same treatment, Shapiro added.
The specialist noted that for the majority of token creators, the issue is not only registration, which many cannot afford.
“[…] there is no clear regulation (no matter how many times Gensler says otherwise); too many new questions (for example, is each protocol change a new “proposal”?),” Shapiro explained.
He came to the conclusion that due to the impossibility of registration, companies will be forced to pay huge fines, stop working on protocols, destroy all preliminary developments and agree to the delisting of tokens.
why do journalists not ask Gensler about this in his countless media appearances? why do they let his claims of “just register” go unchallenged? what is the plan? we are all wondering, and billions of American $ are at risk@GOPMajorityWhip @PatrickMcHenry please act fast
— _gabrielShapir0 (@lex_node) February 26, 2023
“That would mean 12,305 lawsuits and $663 billion in value disappearing from the market. Why don’t journalists ask Gensler about this in his countless media appearances? Why do they leave unanswered his claims of “just registering”? What is our plan? We all wonder. Billions of American dollars are at risk, — said the expert.
In conclusion, Shapiro called on Congress, represented by the speaker of the lower house, Patrick McHenry, to respond to the current situation.
Recall that Gensler called the regulation of cryptocurrencies a priority in 2023. The agency later tabled a proposal to expand and strengthen the role of qualified custodians in relation to digital assets.
Earlier, the Chairman of the Commission called the cryptocurrency market centralized. He urged the platforms to apply to the SEC regarding the recognition of an asset as an investment contract. The official also warned of the possible prosecution of unregistered bitcoin exchanges.
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