U.S. Securities and Exchange Chairman Gary Gensler reached out to European lawmakers Wednesday with a request for collaboration on issues ranging from cryptocurrency regulations to disclosure rules on risks related to climate change, during a European Parliament committee hearing on economic and monetary affairs.
“Our global markets are inextricably linked, with money flowing between them in
microseconds,” he said. “New financial technologies continue to change the face of finance for investors and businesses.”
Gensler discussed the SEC’s priorities in financial regulation, including cryptocurrency, its efforts to make new rules on digital engagement efforts by app-based stock brokers, and new disclosure rules on climate change risk.
On the topic of digital assets, Gensler repeated previous comments he’s made, arguing that the cryptocurrency industry must embrace a new international regulatory framework if it hopes to continue to grow and innovate.
“For those who want to encourage innovations in crypto, I’d like to note that
financial innovations throughout history don’t long thrive outside of public policy frameworks,” Gensler said. “Unfortunately, this asset class has been rife with fraud, scams, and abuse in certain applications.”
Members of the European Parliament’s Committee on Economic and Monetary Affairs pressed Gensler on whether he felt U.S. securities laws give him or other American regulators the tools they need to protect investors in the markets for digital assets.
Gensler said that his agencies tools are expansive, but he has also called on Congress to update securities laws to bring more clarity to regulation in the space.
“Many of these crypto tokens have..entrepreneurs behind them and the investing public is looking and hoping for a profit based upon the efforts of that entrepreneurial group,” Gensler said. “Under our U.S. laws, reviewed by our Supreme Court, that often makes those investment contracts and under our laws a security.”
The Supreme Court has ruled that financial instruments that qualify as investment contracts are subject to regulations and oversight by the SEC.
“We have significant authorities that are clear, but we also have some gaps,” particularly around which regulator has the power to regulate cryptocurrency exchanges that enable investors to trade digital tokens that are securities and many that are not, Gensler added.
“But how do you ensure [crypto exchanges] are really inside the regulatory perimeter…while at the same time not undercutting your current robust regulatory regime,” is an important question for lawmakers, Gensler said. “I do think with our legislative body, with Congress’s power we can address this.”
