SEC chair addresses crypto industry concerns over regulatory compliance

During a conference in New York, the chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, addressed concerns that the agency is attempting to stifle the crypto industry.

He argued that numerous companies in the space had knowingly chosen to disregard SEC regulations, characterising their actions as a “calculated economic decision.” Gensler emphasised his belief that the majority of crypto tokens qualify as securities and should therefore be registered with the SEC. Consequently, most crypto exchanges would be required to comply with securities laws. Gensler dismissed claims by market participants who argue that they were unaware of the potential illegality of their conduct, stating that they had willingly taken the risk of enforcement as part of their business strategy.

Recently, the SEC’s lawsuits against Coinbase and Binance, two prominent crypto exchanges, drew criticism from the crypto industry. The SEC accused the exchanges of violating securities laws by failing to register their operations. Brian Armstrong, the CEO of Coinbase, a vocal opponent of the SEC, rebuffed Gensler’s actions and labelled him an “outlier” among Washington policymakers. Coinbase and Binance denied the SEC’s allegations and expressed their intent to vigorously defend themselves in court.

Furthermore, U.S. lawmakers called for the Department of Justice to investigate Binance following allegations in the SEC’s complaint that the exchange had provided false statements to Congress about its business practices. The SEC also filed a court document urging the freezing of Binance’s U.S. assets. In response, Binance CEO Changpeng Zhao disclosed via Twitter that Binance.US possessed approximately $2 billion in customer assets, which had remained on the platform unless withdrawn by customers.

Under Gensler’s leadership, the SEC has asserted its jurisdiction over the crypto industry, despite its initial regulatory ambiguity. The agency argues that most tokens are securities and should adhere to disclosure rules. Consequently, other U.S. crypto exchanges may face scrutiny as a result of the recent lawsuits, broadening the SEC’s list of identified securities. The industry has challenged the SEC’s authority and called for transparent regulations.

In defence of the SEC’s actions, Gensler noted that the rules are clear, citing over 100 crypto enforcement actions and additional guidance issued by the agency. He acknowledged that achieving compliance requires effort. Consequently, many companies have strengthened their compliance measures, shelved products, and expanded operations beyond the United States. Circle Internet Financial, a cryptocurrency operator, announced the appointment of Heath Tarbert, the former chair of the Commodity Futures Trading Commission, as their chief legal officer and head of corporate affairs, effective July 1.