SEC Chairman Gary Gensler Says “The Law Is Clear” For Crypto Exchanges

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U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler testifies before the Senate Banking, Housing, and Urban Affairs Committee during an oversight hearing on Capitol Hill in Washington, September 15, 2022 .

Evelyn Hockstein | Reuters

SEC Chairman Gary Gensler has a message for Coinbase and other crypto exchanges: the rules are clear and must be followed.

In a video posted to Twitter on Thursday, Gensler said crypto exchanges need to treat cryptocurrencies like securities and stop acting like regulations are ambiguous.

“The law is clear,” Gensler said. “If you are a stock exchange, clearinghouse, broker or trader, you must comply, register with us, manage conflicts of interest and disclose material information. For 90 years, these laws have helped protect investors like you.”

The regulator’s comments come days after crypto exchange Coinbase sued the SEC, demanding that the agency be forced to publicly share its response to a month-old petition on whether it would allow the crypto industry to be regulated using existing SEC frameworks.

Coinbase, which received a Wells notice in March indicating that enforcement action could be expected, argued that the SEC has been inconsistent in how it deals with cryptocurrencies and that the industry needs clarity. regulatory.

Since January, the SEC has taken action against crypto exchanges Bittrex & Gemini, crypto lender Genesis, and a number of individual actors accused of manipulating crypto assets, including crypto entrepreneur Justin Sun and the founder of Terraform Labs, Do Kwon.

Gensler titled his video on Thursday, “Office Hours,” and attempted to argue that what crypto exchanges are very obviously doing is marketing and selling securities, even though debate on the topic has been clouded.

“An investment contract exists when you invest money in a joint venture with a reasonable expectation of profit from the efforts of others,” Gensler said. “Intermediaries for investment contracts, whether stock exchanges, brokers, dealers, clearing houses, must comply with securities laws and register with the Securities and Exchange Commission.”

Gensler said that by failing to comply with SEC regulations, the platforms “lack basic investor protections,” which prevent customers from accessing their funds in the event of problems, including including bankruptcies.

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