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 they must be obeyed.
In a video posted on Twitter on Thursday, Gensler said that crypto exchanges must treat cryptocurrencies like securities and stop acting as if the regulations are ambiguous.
“The law is clear,” Gensler said. “If you’re a securities exchange, clearinghouse, broker, or dealer, you must come into compliance, register with us, and deal with conflicts of interest and disclose important 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, asking that the agency be forced to publicly share its answer to a months-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 an enforcement action could be expected, has been arguing that the SEC has been inconsistent in how it treats cryptocurrencies and that the industry needs regulatory clarity.
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 disgraced Terraform Labs founder Do Kwon.
Gensler titled his video on Thursday, “Office Hours,” and tried to make the point that what crypto exchanges are doing is very obviously marketing and selling securities, even if the debate on the topic has been obscured.
“An investment contract exists when you invest money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others,” Gensler said. “Intermediaries for investment contracts, whether they’re exchanges, brokers, dealers, clearinghouses, they need to comply with the securities laws and register with the Securities and Exchange Commission.”
Gensler said that by not complying with SEC regulations, the platforms “don’t have basic investor protections,” which is leading to clients being unable to access their funds when there are problems, including bankruptcies.
MacKenzie Sigalos contributed reporting to this story.
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