The Crypto Community Responds To SEC Chair Gensler’s Views

The crypto community responds to SEC Chair Gary Gensler’s view on crypto markets, which was shared in a recent tweet. Gensler stated they should be handled the same as conventional capital markets, regardless of digital assets that use “different technology.”

“There’s no reason to treat the crypto market differently from the rest of the capital markets just because it uses a different technology.”

There Is No Escape From Securities Laws

Gensler was specifically referring to US securities rules as they pertain to crypto financing. Using the 1966 National Traffic and Motor Vehicle Safety Act as an example, the SEC Chair stated that securities rules from the 1930s also safeguard investors.

“We can dispense with the idea that crypto lending isn’t subject to regulation. On the contrary, the rules have been around for decades. The platforms aren’t following them.”

Gensler cited recent market upheaval in which individual CeFi lenders halted withdrawals and/or declared bankruptcy, noting that such situations are precisely why crypto businesses should comply with securities regulations.

Expanding on this point, the SEC Chair hinted that certain cryptocurrency platforms were skirting “time-tested investor safeguards” by re-labeling a product or the accompanying claimed advantages. However, citing legal precedence, Gensler stated that the economic reality of a product, rather than its labeling, decides whether securities rules apply.

He then lambasted non-compliant platforms for acting as though they had a choice. Those who willfully choose to break the law are far more dangerous.

“Rather, it is as if these platforms are saying they have a choice — or even worse, saying “Catch us if you can,”

It should be recalled that, in a September 2021 interview with the Financial Times, Gensler cautioned crypto platforms that they risked “survival” danger if they ignored established regulations. In terms of public policy, he also stated that crypto assets “were no different from others.”

Community Response

The crypto community responds, rather it retailed on Twitter against SEC Chief Gensler, with key themes including tolerating misdeeds by huge banks and investment managers and claims of purposely impeding crypto markets.

Several important cryptocurrency leaders also chipped in to help advance the idea of cryptocurrency regulation forward. For example, Ryan Adams, the creator of the Bankless media platform, inquired about Gensler’s involvement with the crypto community. Adams then extended an offer to participate in the Bankless podcast.

However, Tony Edwards of the Thinking Crypto Podcast was less than kind in his criticism of Gensler’s approach to treating crypto markets similarly to mainstream markets. Edwards claimed that the worldwide token distribution, which is usual for a cryptocurrency project, requires authorities to take a totally new approach.

You are wrong. You have to regulate crypto differently. Tokens are distributed globally on decentralized blockchain networks. Many other countries treat crypto as virtual currency while you want them to be securities to line your pockets amd gain more power. you should resign!

— Tony Edward (Thinking Crypto Podcast) (@thinkingcrypto) August 22, 2022

The SEC and the Commodities and Futures Trading Commission (CTFC) are now at odds over digital asset regulation. It is proposed that cryptocurrencies that qualify as commodities be subject to the CTFC’s jurisdiction.