Speaking together at last week’s Digital Asset Compliance and Market Integrity Summit, two chairs of the U.S. Securities and Exchange Commission (SEC) agreed that cryptocurrencies should fall under federal regulations.
Jay Clayton, SEC chair in the Trump administration, interviewed current chair Gary Gensler.
When Clayton asked Gensler if the SEC plans to regulate crypto, Gensler said, “I don’t think you mind if I quote you back to you.”
Gensler then reiterated Clayton’s past view that digital currencies are created largely to make money for their creators, which places them within “the time-tested definitions of an investment contract and are thus under the securities law,” Gensler said.
Clayton agreed, adding “and any other of the array of definitions of a security in addition.”
Their agreement strengthens the view held by many observers that cryptocurrencies that do not register with the SEC violate the law and could be subject to lawsuits or prosecution.
The cryptocurrency industry strongly opposes the view that crypto is a security.
There is general agreement that not every crypto is a security. For example, Bitcoin is considered a commodity because many people around the globe mine it.
However, both Clayton and Gensler focused on the “asymmetry of information” between the creators of a crypto and those who buy it.
The chairs believe certain disclosures about the offerings should be mandated.
Gensler warned of what he called “a spill in Aisle 3,” referring to the possibility of a well-publicized crash or scandal surrounding a currency that would prompt public outcry for regulation.
He also cited the risks of stablecoins, cryptos that tie their values to a hard asset, such as a national currency. In some cases, stablecoin purveyors have lacked the quality or quantity of the backing asset that they have claimed.
Public outcry also could arise from “a lot of the investing public getting hurt either by fraudsters or by good-faith actors who are promoting and raising money” without providing “full and fair disclosures,” Gensler said.
Since leaving the SEC, Clayton has become an advisor to crypto-related businesses. Gensler taught courses in cryptocurrency and blockchain technology at MIT before heading the SEC.
TREND FORECAST: The SEC permitting Bitcoin ETFs (“Bitcoin ETFs in Prep as SEC Highlights Path to Approval,” 24 Aug 2021) has been the crucial step that legitimizes oversight and regulation of other cryptocurrencies.
Indeed, we have written extensively and long forecasted the ups and downs of crypto currency trends.
Despite the SEC talk, the anti-crypto threat in the U.S. and Europe will lessen as more banks, businesses and investment funds go crypto, thus, the upward crypto trends, especially bitcoin, will continue to gain momentum.
And as we have reported, El Salvador, in a partnership with Blockstream, a digital assets infrastructure company based in Canada, has announced plans to issue $1 billion in bitcoin backed bonds next year. Part of the funds will be used to build a “Bitcoin City that will have no income, property or capital gain taxes.”
Therefore, while there are government movements to regulate cryptocurrencies, other countries, states and cities will be moving to become a Top 2022 Trend (see “CRYPTO CAPITOL: WALL STREET 2.O”).