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U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler responded to a Coinbase petition demanding the agency take a clear position on cryptocurrency regulation, arguing that relevant laws are already in place.
In a keynote speech on May 15 at the Financial Markets Conference, Gensler was asked about the dispute with Coinbase, cryptocurrency rules, and why “the SEC doesn’t publish rules for this market.”
In response, Gensler stated emphatically that “the rules have already been published”, adding that:
“To put it bluntly: this is a field that operates largely substandard.[…] There is nothing about the new technology that makes it inconsistent with public policy as laid down by Congress.”
Gensler argued that the SEC had already established rules on what is required to hold assets, be an exchange, broker, dealer, or advisor, and how to register securities offerings with the agency.
The current view of the SEC chairman is that most crypto-currency assets other than Bitcoin (BTC) fall within the definition of investment contract securities.
“If the public invests money and expects profits based on the efforts of others in an ordinary enterprise, that is safety,” he said, adding:
“There are financial intermediaries, nodes in the network, and they must comply if there are securities on their platforms.”
Coinbase — and many other U.S. crypto firms — have repeatedly spoken out against the apparent lack of clear regulation of cryptocurrencies and the SEC’s so-called “enforcement regulation” approach to cryptocurrencies, as well as its hostile nature when dealing with digital asset companies.
This afternoon, I’ll be joining @AtlantaFed‘s 2023 Financial Markets Conference.
My remarks will be livestreamed at 12:45pm: https://t.co/T01c8zAD8c#FedFMC https://t.co/igDs9w8F1y
— Gary Gensler (@GaryGensler) May 15, 2023
In April, the firm went so far as to file a lawsuit in federal court demanding the SEC publicly disclose its position on a July 2022 petition calling for clear rules for the cryptocurrency sector.
Notably, the US Chamber of Commerce also backed this call from Coinbase, as it strongly criticized SEC oversight in a May 9 amicus report.
“The SEC has deliberately confused the situation by claiming complete authority over digital assets in a haphazard, enforcement-based approach,” the statement said.
Linked SEC Under Criticism for Retention Rule: Deciphering the Law, May 8-15
On May 8, Coinbase General Counsel Paul Grewal also sent a letter to the SEC asking for changes to the agency’s proposed retention rule updates for registered investment advisors.
In essence, Coinbase argued that the proposals unfairly target cryptocurrency companies, lack the nuances of rules for various asset classes, and make incorrect assumptions about securities-based custody practices.
Other players in the field, such as Web3 venture capital Andreessen Horowitz (a16z) and the Blockchain Association, have also echoed similar criticisms of the proposals.