U.S. Securities and Exchange Commission (SEC) chairman Gary Gensler says many cryptocurrency firms need to register their tokens with the agency.
According to his testimony today before US Congress, Gensler deems a large portion of the approximate 10,000 cryptocurrency tokens as securities and says securities laws must apply to their transactions.
Gensler, before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, says,
“Given that most crypto tokens are securities, it follows that many crypto intermediaries — whether they call themselves centralized or decentralized (e.g., [decentralized finance]) — are transacting in securities and have to register with the SEC in some capacity.”
Gensler says he is directing his staff to work with cryptocurrency companies and entrepreneurs to assist in the registration process. He says his agency will provide some flexibility.
“I’ve asked staff to work with crypto intermediaries to ensure they register each of their functions — exchange, broker-dealer, custodial functions, and the like — which could result in disaggregating their functions into separate legal entities to mitigate conflicts of interest and enhance investor protections.”
Gensler also says his agency is working on rules around trades of non-security tokens.
“As I have stated previously, a small number of tokens likely are crypto non-security tokens, though they may represent a significant portion of the crypto market’s aggregate value. Thus, I have asked staff, in working to register crypto security intermediaries, to recommend a pathway to allow both the crypto security and crypto non-security tokens to trade versus or alongside one another.”
Applying securities law to these tokens, Gensler says, will preserve the integrity of his agency’s authority over the securities asset class as a whole.
“I look forward to working with Congress on various legislative initiatives related to crypto markets while maintaining the robust authorities we currently have. Let’s ensure that we don’t inadvertently undermine securities laws underlying $100 trillion capital markets. The securities laws have made our capital markets the envy of the world.”
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