The legal test US regulators use to determine if an investment contract is an investment contract should be regulated by the SEC. Most cryptocurrencies pass it according to the head of the SEC.
The chair of the SEC said in a speech that the majority of the coins in the market are securities. The securities laws apply toOffers and sales of these thousands ofcryptocurrencies.
Most of the industry is operating illegally.
The SEC chief has argued before that most cryptocurrencies pass the Howey test. His latest declaration comes at a time when the price of cryptocurrencies are in a bear market.
He called on the operators of cryptocurrencies and stable coins to register and regulate their assets. He pointed a finger at the exchanges that were not registered.
Some members of Congress want the US Commodity Futures Trading Commission to regulate cryptocurrencies instead of the SEC. A minority of coins, including bitcoin, may not be fully qualified as securities according to Gensler.
In the case of a small number of non-security token, they might meet some parts of the Howey test, but not necessarily all of them, and may not be securities.
He implied thatbitcoin should be treated under commodities laws rather than the securities regime.
He assured the lawyers in his audience that their clients wouldn't fare the same as bitcoin after suggesting that the virtual currency should be treated more like a commodity than a security. He asked how the differences differed.
“I have a question for the lawyers in this audience.
Do you represent any clients regarding their token projects?
How exactly were you hired? Did you enter into an engagement letter? I’m going to guess that you had a client. I’m going to guess that you did not take on the work on behalf of a dispersed, unidentified group of individuals in an ‘ecosystem.’”
The SEC has taken a long time in prosecuting Cryptocurrencies. The commission cracked down on initial coin offerings (ICOs), sued stablecoin operator, and charged BlockFi for failing to register its high yield lending program. Rather than sweep its enforcement actions, it chose to pick off cases one by one.
Gensler urges voluntary registration with the commission while making statements about his views oncryptocurrencies. In April, he said that only a few cryptocurrencies may not be securities, and in July he said that he saw a lot of noncompliance in the industry.
The rest of the US government is increasing its efforts to prosecute crimes related to the digital currency. According to the Washington Post, the US Treasury Department is preparing a series of reports urging the White House to crack down on cryptocurrencies and stable coins. Tornado Cash is a software protocol used by North Koreans. The US Justice Department brought insider trading charges against former employees of Open Sea.
Gensler doubled the size of the SEC's crypto assets enforcement division after the Biden administration signaled that it will crack down on crimes related to cryptocurrencies. It is still unclear if he will get more aggressive in reining in an industry he sees as mostly illegal.
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