US Securities and Exchange Commission (SEC) Chairman Gary Gensler says many cryptocurrency firms must register their tokens with the agency.
According to his testimony today before the US Congress, Gensler considers a large portion of the approximately 10,000 cryptocurrency tokens to be securities and says that securities laws must apply to their transactions.
Gensler, before The United States 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]) — deals in securities and must 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 have asked staff to work with crypto intermediaries to ensure that they register each of their functions – exchange, broker-dealer, custody functions and the like – which may result in their functions being split into separate legal entities to reduce conflicts of interest and improve investor protection.”
Gensler also says his agency is working on rules around non-security token trading.
“As I have mentioned before, a small number of tokens are likely to be crypto-non-security tokens, although they may represent a significant part of the overall value of the crypto market. Therefore, I have asked the staff, in the effort to register crypto-security intermediaries, to recommend a way to allow both crypto-security and crypto-non-security tokens to trade against or alongside each other.”
Applying securities law to these tokens, Gensler says, would preserve the integrity of the 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 have today. Let’s make sure we don’t inadvertently undermine the securities laws that underpin the $100 trillion capital markets. The securities laws have made our capital markets the envy of the world.”
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