What does the SEC say about crypto?

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The narrator

Key officials from the U.S. Securities and Exchange Commission (SEC) mentioned the enforcement of crypto projects earlier this month: Chairman Gary Gensler and Enforcement Director Gurbir Grewal.

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Why is this important

We’ve spent literally years interpreting statements from SEC officials to determine how the agency might approach crypto. This month, Gensler and Grewal mentioned crypto in the context of enforcement action, which might just be a coincidence, but could also be a signal for those looking for more concrete action.

Break it

SEC Chairman Gary Gensler addressed the Securities Enforcement Forum earlier this month, citing SEC predecessor Joseph Kennedy on “waging war without quarter” on those who violate federal law.

This ideal holds today, according to the current boss of the agency.

“We will continue to pursue fouls wherever we find them. This will include difficult cases, new cases and, yes, high impact cases – whether in special purpose acquisition companies, cyber, crypto or private funds; whether it is accounting fraud, insider trading or record keeping violation. I know, record keeping violations can come as a surprise. While these may not make the headlines, the underlying bonds are critical to market integrity, especially given technological developments, ”Gensler said.

Grewal, the relatively new app chief, also mentioned crypto in comments made during a keynote address.

“But these days, most often in the context of crypto issues and our investigations of certain ESG – or environmental, social and governance – products and services, we hear that we should avoid ‘regulation by application’.” , Grewal said.

I’m not sure if these mentions are now superficial, included because everyone is talking about crypto these days, or if they are part of a broadening effort to include crypto in the work of the SEC.

The story continues

What I do know is that we are seeing piecemeal actions by the agency against various crypto projects, mostly suspected frauds or alleged securities registration violations. There are still no binding or clear guidelines on what startups should do if they want tokens to be an integral part of their projects.

To be clear, we need to distinguish between crypto projects which are (a) blatant cash grabbers designed to defraud people, (b) projects which make a legitimate effort to achieve their goals and cannot for technical or circumstantial reasons beyond their control, and (c) projects that are actually successful in achieving their goals, at least for the purposes of this column.

The SEC mainly focused on categories (a) and (b).

Agency officials often say they want to encourage innovation – in his remarks on Nov. 8, Grewal said the SEC welcomes new tools for capital formation. Yet he included the equally common warning that the titles must be recorded.

“But – just as important – all securities offered or sold to US investors – regardless of form or name – must comply with US securities laws. The aim here is to protect investors and the integrity of our markets by ensuring that investors receive appropriate information and that products are subject to regulatory scrutiny, ”he said.

Anyway, I’m curious to see if or how the SEC might respond to the ConstitutionDAO repayment situation and if there is any applicable lesson here.

Changing of the guard

Legend: (name.) = Candidate, (rum.) = Rumor, (act.) = Interim, (inc.) = Incumbent (no replacement planned)

US President Joe Biden has announced he will appoint Federal Reserve Chairman Jerome Powell for a second term as head of the US central bank, and Boston Fed Governor Lael Brainard as vice-president. presidency. Biden highlighted Powell’s actions during the coronavirus pandemic, as well as his possible focus on climate change and actions around current inflation in a statement announcing the appointment.

“[Powell’s] also stressed the importance for the Fed to play a more proactive role in the months and years to come by ensuring that our financial regulations stay ahead of emerging risks, whether they come from crypto innovations. less regulated currency or nonbank financial institution practices, ”Biden said in remarks Monday.

(Gyges Lydias) Several crypto companies have published their take on digital asset policy in the United States. Gyges Lydias, a potential regulator or current or former congressional employee, details how these proposals could become law.

(Vice) “After ‘Buy the Constitution’: Everyone is very crazy, confused, loses a lot of money, fights, cries, etc.” It is certainly a title.

(Bloomberg) Matt Levine is still a must read, but his analysis of El Salvador’s bitcoin link is very clear to those of you who, like me, missed this part of the weekend.

If you have any ideas or questions on what I should discuss next week or any other comments you would like to share, please feel free to email me at [email protected] or find me on Twitter @nikhileshde.

You can also join the group chat on Telegram.

See you next week !

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