Multiple crypto regulators could ‘undermine’ securities rules

Securities and Exchange Commission Chair Gary Gensler cautioned that multiple federal agencies overseeing securities could “undermine” market regulation, during a regular oversight hearing of his agency by the Senate Banking Committee. 

“If we end up that there’s multiple federal agencies defining what a security is, and another agency tries to define it, it could undermine what we’re doing,” said Gensler. The SEC chair’s comment came while the Senate Agriculture Committee debated legislation to give another U.S. financial markets regulator, the Commodity Futures Trading Commission, more authority to designate and digital assets as commodities. 

The SEC chair added that it was important to have, “one cop on the beat—one regulator,” in cryptocurrency matters. 

Gensler’s response came to questioning from Senate Banking Committee Chair Sherrod Brown (D-Ohio) about financial markets regulators coordinating oversight, with crypto being a particularly tricky area. Digital assets with the largest market capitalization, bitcoin and ether, are treated more as commodities under the jurisdiction of the CFTC because they are seen as sufficiently decentralized, whereas the SEC views most crypto tokens as securities, placing them under more stringent disclosure and investor protection laws. The SEC is reportedly investigating Coinbase over listing unregistered securities on its exchange. 

Crypto exchanges and venture capital firms have lobbied for changes to the law, or argued that listed tokens are sufficiently decentralized so as to not fall under securities rules. 

In response to further questioning from Sen. Pat Toomey (R-Pa.), Gensler noted that the SEC has provided guidance on how securities laws apply to crypto projects since 2017 and brought “70 to 80” enforcement orders against crypto companies over failure to follow those laws. 

Still, Gensler emphasized that his agency works closely with the CFTC on companies that deal in both commodities and securities, and would continue to work with the commission if Congress were to give the CFTC greater authority over cryptocurrencies. 

Brown commented that his committee would consult on the Senate Agriculture Committee, which holds jurisdiction over the CFTC, on the bill Sen. Debbie Stabenow (D-Mich.) has offered to grant the CFTC more power in digital asset markets. 

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