Gary Gensler: “Crypto Sector Full of Dealers and Scammers”

Gary Gensler

US Securities and Exchange Commission (SEC) Chairman Gary Gensler said at a conference he attended following back-to-back lawsuits against Binance and Coinbase that the “crypto sector is full of dealers and scammers.”

Gary Gensler: «Crypto sector full of dealers, cheaters and scammers»

Gensler, who attended the Piper Sandler Global Exchange & FinTech Conference online in New York, said most cryptocurrencies are investment contracts and fall under SEC jurisdiction. He also reiterated that exchanges offering such tokens must register with the authority. According to Gensler, it is imperative that public confidence in capital markets is not jeopardized by cryptocurrency markets. Also, that the potential negative impact of cryptocurrency markets on investors will be addressed and mitigated.

The SEC this week launched separate cases against Binance and Coinbase, alleging that the companies offered securities brokerage services without registering with the SEC. Coinbase has been accused by regulators of mixing the roles of exchange, broker and clearing house. Binance has also been accused by the SEC of mixing investor funds. Gensler argued that the word “investment treaty” is one of more than thirty criteria that Congress has included in its definition of securities.

He also said, “The vast majority of crypto tokens pass the test for investment contracts.” Gensler added that anyone looking to sell cryptocurrency-backed investment contracts must register with the SEC. Or prove that he is eligible for an exemption.

SEC chief dismisses complaints from crypto exchanges

Gensler also railed against cryptocurrency exchanges for failing to divest themselves of broker-dealer functions. “Rich, if any of your previous speakers said they were combining these functions or secretly trading against their clients without following our rules, no one in this room would have accepted that,” Gensler told Rich Repetto, Piper Sandler’s conference chair and executive Company Research Analysts.

In a Q&A session with Repetto, Gensler dismissed complaints from crypto companies that the registration path was unclear. And said that these companies “know how to register”. Gensler was also asked if Congress should pass comprehensive crypto legislation. He didn’t answer the question directly. But dismissing claims that the rules about which assets are investment contracts and which aren’t are too vague: “If you don’t like the answer, that doesn’t mean a lack of clarity.”

Finally, Gensler reported that 20,000 comments had been received on the proposed market structure regulations. Including a regulation on the charging of fees for the flow of orders. However, he declined to give a specific timeframe for the final decision on implementing the regulations.

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