SEC Chairman Gary Gensler testified in front of the Subcommittee on Financial Services and General Government, part of the House Appropriations Committee, to justify the agency’s budget request. As part of the questioning from various members, Gensler answered several questions which were crypto-related.
Chairman Gensler affirmed his belief that crypto exchanges must register as national exchanges with the SEC. In response to a question from Ohio Congressman David Joyce, Gensler outlined his position.
Congressman Joyce noted that Gensler wants more funding to pursue crypto firms but “with no clear comprehensive and final rules regulating cryptocurrency” asking how is appropriate to ramp up crypto enforcement.
Gensler explained:
“I actually think there are very clear rules. If you are raising money from the public, and the public is betting on that, you have to disclose certain things. That’s called disclosure and it’s pretty straight. If you have an exchange, a crypto exchange, that has these tokens on these exchanges, and those tokens are securities under securities law .. that exchange should register with us. As a national exchange.”
Gensler stated that they have said this publicly and they have spoken to many of these exchanges one on one.
“Come in, work with us, we can even use some of our exemptive authority to work to get them registered.”
He added:
“These exchanges are trading against their customers. They are literally making markets against their customers, they are holding, what is called the private key, if they lose them or there are hacks .. guess what, the public just have to get in line like they are in bankruptcy court .. we are trying to build in the protections that are already in securities law and get folks registered.”
Gensler said they also have a robust enforcement effort to be the cop on the beat.
Most likely all US-based crypto exchanges are in discussion with the SEC as to how they will move forward or perhaps they have a Broker Dealer and ATS license they may leverage. If not, a crypto exchange will have to exit the market and look elsewhere for business because crypto exchanges under the Gensler administration mean registered exchanges.
