The vast majority of crypto tokens in circulation are securities that should be overseen by the Securities and Exchange Commission, Chairman Gary Gensler said in a speech Monday.
“The fact is, most crypto tokens involve a group and entrepreneurs raising money from the public in anticipation of profits — the hallmark of an investment contract or a security under our jurisdiction,” he said during a speech at the Penn Law Capital Markets Association Annual Conference.
“Some, probably only a few, are like digital gold; they may not be securities,” Gensler added, likely referring to bitcoin BTCUSD,
Gensler also reiterated his intention to bring greater regulatory scrutiny to cryptocurrency exchanges like Binance, Coinbase COIN,
Gensler said that he believes that registering large crypto platforms will be the first step in bringing the broader industry into compliance with U.S. securities laws. He noted that five largest digital-asset platforms account for 99% of all crypto trading activity, and so registering these platforms would signal to token issuers that they must be compliant as well.
“Until the platforms are actually registered and regulated, I don’t think the tokens will significantly come in and register,” he said, adding that the SEC “is in conversations” with these platforms ant that “we’ll see where they go.”
Many issuers of cryptocurrencies have not registered with the SEC as securities issuers, despite Gensler’s repeated argument that most digital tokens are under its jurisdiction. Gensler’s predecessor, Jay Clayton, has also argued that the issuers of crypto tokens have been delinquent in not registering with the agency.
In an interview with MarketWatch in February, Gensler warned that a failure by exchanges to register with the agency could lead to fines or other penalties. “We’ll continue to pursue [enforcement actions], based on the facts and the law, wherever that takes us,” he said.
The SEC has jurisdiction over those who issue securities to raise money from the general public, while the Commodity Futures Trading Commission oversees derivatives markets based off commodities markets. The CFTC does not, however, oversee the spot markets for commodities. Therefore a market for digital assets deemed to be commodities would not be regulated like markets for stocks, bonds, or derivatives like options and futures.
CFTC Chairman Rostin Behnam has argued that Congress should pass a law giving his agency oversight of digital asset spot markets, though this would not resolve the debate over which digital assets are securities and which are commodities.
