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Gary Gensler, Chair of the United States Securities and Exchange Commission (SEC), is determined to convince legislators that the crypto sector should fall under his agency's jurisdiction, despite recent challenges in court. This message is expected to be conveyed in a Senate Banking Committee hearing scheduled for September 12.
Over the past 60 days, the SEC faced defeats against major players in the cryptocurrency world, Ripple and Grayscale. These defeats have not deterred Gensler from maintaining his stand on the importance of regulating the crypto world.
Gensler’s Senate testimony will emphasize the SEC's perspective on crypto assets being securities. He draws parallels between the current crypto market dynamics and the financial markets of the 1920s, prior to the establishment of federal securities regulations.
He consistently highlights the Howey Test, a legal benchmark used to determine if an asset qualifies as a security. Gensler's position is that the majority of cryptocurrency tokens likely satisfy the conditions of this test. Hence, he believes it’s crucial for the crypto sector, including intermediaries, to adhere to securities laws.
The SEC’s position on crypto was challenged on July 13, when Judge Analisa Torres sided partially with Ripple. She opined that the XRP token sales to general consumers weren't in violation of federal securities laws. In the wake of this judgment, the SEC has chosen to appeal, and it's anticipated that other crypto firms facing legal challenges from the regulator will cite the Ripple decision in their defenses.
A further setback for the SEC occurred on August 29 when their decision to decline Grayscale's application to transition its Bitcoin Trust to a Bitcoin exchange-traded fund (ETF) was reversed. The ruling judge criticized the SEC's decision as lacking solid foundation.
Such high-profile rulings have influenced other companies, like the blockchain-based payment system LBRY. After being deemed guilty of contravening securities regulations in July, LBRY is now considering an appeal.
While recent court rulings might be seen as setbacks for the SEC, Chair Gary Gensler remains unwavering in his belief that crypto assets are securities and should be under the regulatory eye of his agency.
