- Gary Gensler’s hearing paints a rather bleak future for the crypto space in the U.S. as he could continue to “regulate” with litigation.
- Not only XRP, but also Ethereum could be targeted by the SEC.
While Gary Gensler’s introductory speech as the new chairman of the U.S. Securities and Exchange Commission (SEC) still seemed like a positive signal for the crypto world, the hearing before the U.S. Senate Banking Committee was a big disappointment. As elicited by Jeremy Hogan, a popular attorney in the XRP community, there could be a lot of dark want coming for the crypto space. Hogan said:
I never like to come across too negative on this vlog, but the truth is that the risk alert issued last week along Gensler testimony today is really a disappointment to me. I see a lot of clouds on the horizon in the crypto world.
For a long time during the Gensler hearing, the conversation was not about blockchain or cryptocurrencies. However, after more than an hour, a senator asked what the U.S. Congress and SEC can do to create a “forward-thinking regulatory framework.” Gensler responded with a platitude, spinning the question as to how the SEC under him will ensure investor protections from companies:
I think, as I teach at MIT on these subjects, that these innovations have been a catalyst for change. Bitcoin and other cryptocurrencies have brought new thinking to payments and financial inclusion, but they’ve also raised new issues of investor protection that we still need to attend to. If confirmed at the SEC, I will work with fellow commissioners to promote the new innovation, but also at the core make sure for investor protection. If something were a security for instance, it comes under the securities law, it comes under the SEC. If those exchanges that trade those
A Tennessee senator also asked the incoming SEC chair about his “approach to digital assets.” Gensler said he will treat cryptocurrencies in a “technology-neutral” manner. According to Hogan, this will mean that he will treat blockchains and DLT like any other company or security, putting them in the old pigeonholes. Specifically, Gensler responded:
It’s always important to update our market oversight to new technologies, but I believe for most to be technology neutral. I say this because these new technology cryptocurrencies and potentially CBDC it’s important to stay true to our principles of investor protection. […] So I think at the SEC it’s really to the extent somebody is offering an investment contract and security that’s under the SEC’s remit and exchanges that operate there. […] If not, it’s a commodity as Bitcoin has been deemed.
The senator from Wyoming, a U.S. state that is very progressive and where Ripple also recently registered a new company, addressed Gensler’s point that the SEC has been a “black hole” for progress so far and whether that will change. Gensler also sidestepped this question of how the SEC can help blockchain companies, instead referring again to investor protection.
Finally, Hogan noted that Gensler’s answers dovetail with the recent SEC “risk warning” for digital assets, which is not a good sign for the crypto world. The SEC could continue its reign of terror to regulate with litigation and threats of litigation. Eventually, Hogan said, even Ethereum could be targeted by the SEC under Gensler’s direction. Hogan stated:
He’s been saying is for years now. But well I could or wouldn’t hear it. According to Gensler the SEC is going to scare companies into compliance and that’s going to be through litigation and threat of litigation. […]
The SEC has been building case authority over the last couple of years stretching the definition of what a security is, to include everything, including Ethereum. Note how he singled out Bitcoin as a non-security but didn’t mention Ethereum. […] and this is consistent with what happened late last week, the issuance of the SEC risk alert.
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