In a speech delivered June 8 at the Piper Sandler Global Exchange & Fintech Conference, US Securities and Exchange Commission (SEC) Chairman Gary Gensler comparison The current cryptocurrency market to the US stock market in the 1920s, saying that it is riddled with “hikers”, “scammers” and “Ponzi schemes”. He said that just as Congress cleaned up the stock market by enacting securities laws, the current SEC can also clean up the cryptocurrency market by enforcing these laws.
JUST IN: SEC Chairman Gary Gensler says cryptocurrencies are “hikers, scammers, and con artists.” pic.twitter.com/1xRWUMzbel
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In the talk, Gensler praised the Securities Act of 1933 and the Securities Act of 1934, claiming that these laws allowed the American stock markets to “flourish” for the next 88 years. He argued that today’s “crypto stock markets” should also benefit from these laws, as they are “no less deserving of the protection” they provide.
Referring to a court to rule Against Telegram Open Network, Gensler argued that securities for crypto assets are not exempt from securities laws even if they have interest.
“Some promoters of crypto-asset securities argue that their token has a function beyond being an investment vehicle,” Gensler stated. As the courts have argued in Telegram et al., some additional tools do not remove the security of crypto assets from the definition of an investment contract.
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This means that cryptocurrency exchanges must comply with securities laws, including the requirement to separate “the functions of exchange, broker, dealer, and clearing house,” Gensler said. In his view, this separation “helps mitigate conflicts that can arise with the intermingling of these services.”
Gensler denied that such a separation is not possible, saying that separating these three functions simply requires work.
The head of the Securities and Exchange Commission (SEC) argued that the current crypto market is riddled with scams that have arisen due to the industry’s non-compliance with securities laws, saying:
“With such widespread non-compliance, frankly, it’s not surprising that we’ve seen so many problems in these markets. We’ve seen this story before. It reminds us of what we had in the 1920s before the federal securities laws were put in place. Peddlers. Scammers. Con artists. Deception. Ponzi schemes.”
The solution, in Gensler’s view, is to ensure that issuers of cryptocurrency securities comply with the law. This is because these scams are “more likely to occur in markets whose issuers and intermediaries do not adhere to constituent laws.”
As chair of the SEC, Gensler has come under fire in the crypto industry, especially since the SEC filed lawsuits against cryptocurrency exchanges Binance and Coinbase. Critics say he has an overly expansive view of the SEC’s regulatory power and drives innovation outside the United States