SEC Chair Gary Gensler Will Reiterate ‘Crypto-Security’ at Senate

The SEC chair Gary Gensler thinks cryptocurrency assets are securities and are subjected to be dealt with by his agency. The insight comes from recently released testimony from the agency chief. Gensler is going to be present for a hearing at the Senate Banking Committee.

The committee hearing at the Senate is going to take place on Tuesday, September 12, 2023. Prior to the hearing, Gensler’s official testimony revealed that he is going to present in front of lawmakers. One of the key highlights of his testimony is the defense that the Securities and Exchange Commission (SEC) should be in charge of handling the crypto industry-related matters.

According to Gary Gensler’s testimony, the “wide-ranging noncompliance” of the existing securities law by the crypto industry leads to the problems that are visible in the markets. He compared the situation in traditional financial markets before the 1920s until the federal securities laws were introduced.

Gensler’s take on cryptocurrencies seems unchanged despite the recent court’s decisions that came in favor of crypto companies. In one of the prominent lawsuits across the industry, the Ripple vs. SEC lawsuit, the decision was in favor of blockchain-based protocol. The court ruling remarked that XRP is not a security, which was just the opposite of what the agency had alleged.

The testimony shows that the SEC chair still stands with the similar stance considering that the majority of all the crypto assets meet the compliances of the Howey test.

It noted, “Given that most crypto tokens are subject to the securities laws, it follows that most crypto intermediaries have to comply with securities laws as well.”

Past Mismanagement of Crypto Isn’t Deterring SEC

The mismanagement of the crypto industry under the reign of the U.S. securities regulator is well-known. Many experts have raised concerns about the bleak conditions of the market and regulatory vagueness regarding the burgeoning assets.

In the past month, the enforcement actions against the industry have increased. There are companies that the SEC has taken to court while some crypto companies filed against the regulator.

Though the SEC had an upper hand in many court cases via direct wins or settlements, it changed after the back-to-back hits from Ripple, and then recently Grayscale.

SEC Took Hits From Ripple and Grayscale

On July 13, Judge Analisa Torres issued a significant legal decision that marked the SEC’s first major defeat. In her ruling, she partially favored Ripple by determining that the sales of XRP tokens to retail consumers did not constitute a violation of federal securities laws.

Although the SEC is currently in the process of appealing this ruling, it is anticipated that numerous other cryptocurrency firms facing lawsuits from the regulator will use this decision as a reference in their efforts to seek dismissal of their own cases.

On August 29, 2023, the SEC experienced its second significant setback in a case against Grayscale. The case revolved around the SEC’s earlier denial of Grayscale’s request to transform its over-the-counter Bitcoin Trust into a Bitcoin exchange-traded fund (ETF).

In a straightforward manner, the judge declared that the SEC’s rejection of Grayscale’s request was “arbitrary and capricious.” This ruling emphasized the need for a more thorough review of such requests by the SEC.