Gary Gensler hints that cryptocurrencies should be treated as securities

Any cryptocurrencies, with the exception of Bitcoin, can be classified as securities. Such a conclusion follows from an interview with SEC Chair Gary Gensler for New York Magazine.

According to the official, cryptocurrencies in general are created by a group of entrepreneurs who use many complex and legally opaque mechanisms to attract investors.

Bitcoin is fundamentally distinguished by its story of its creation.

From a legal standpoint, such assets meet the definition of securities, and therefore fall under the SEC’s jurisdiction.

The Chair explained regulator’s delayed steps in oversight, a “soft approach” by the previous administration, and the credulity of cryptocurrency supporters in Congress. The latter, following public enthusiasm for digital assets, were not without the influence of advertising during the Super Bowl and the support of celebrities such as Kim Kardashian.

Taking the claims against Kraken related to the staking program as an example, Gensler reminded of the need to separate the functions of crypto firms to prevent “the mixing of services, rife with conflicts of interest”. They are not allowed in traditional finance, he added. In this regard, complete and reliable disclosure to consumers is important.

Gensler noted that the SEC has all the tools it needs to oversee the industry effectively. He noted that virtually all types of crypto transactions already fall under the agency’s jurisdiction. The exceptions are spot Bitcoin trades and the purchase or sale of goods or services using digital assets.

The head of the SEC expressed admiration for the underlying blockchain technology of cryptocurrencies, but questioned the ability of digital assets to serve as a store of value and an alternative payment mechanism.

As reported, in November 2022, U.S. Representative Tom Emmer criticised the head of the Commission for the regulator’s failure to oversee the digital asset industry, which led to the collapse of FTX.

Earlier, Gensler named regulation of cryptocurrencies a priority for 2023. Later, the agency put for public discussion a proposal to broaden and strengthen the role of qualified custodians with respect to digital assets.

Previously, Gensler called the cryptocurrency market centralised. He urged platforms to approach the SEC about classifying any asset as an investment contract. The official also warned of possible prosecution of unregistered Bitcoin exchanges.