SEC Gensler says further legislation for crypto not necessary

Amidst the ongoing debacle of the FTX collapse and SBF’s arrest, there are increasing calls in Washington for legislation to regulate the digital asset industry. 

However, Gary Gensler, the chair of the Securities and Exchange Commission (SEC), has opposed these calls for new laws, stating that existing SEC rules and Supreme Court decisions are sufficient and that crypto issuers and exchanges simply need to follow them. 

After two FTX executives pleaded guilty to fraud charges on Wednesday, Gensler warned other unregistered crypto issuers and exchanges that they may soon face enforcement actions from the agency. In a report in the NY Times, he stated, "The roadway is getting shorter."

According to Gensler's estimate, only a small fraction (approximately 0.06%) of the cryptocurrency tokens in circulation are registered with the Securities and Exchange Commission (SEC). 

Investors in these tokens do not receive the same level of disclosures as they would with investments in stocks. As a result, the public should be cautious when considering the reported volumes traded and values of these tokens.

According to Gensler, many of the thousands of cryptocurrencies listed on exchanges and tracking websites have low levels of trading activity and are susceptible to manipulation, similar to micro-cap companies (small publicly traded companies with a market capitalization of around $50 million to $300 million).

Gensler suggested that insiders of these projects may try to "sell the public on an idea while they're potentially fraudulently pumping up the stock," 

He added:

“This leads to distorted incentives and puts the public further at risk of the token not being properly registered and having proper disclosures and complying with the various provisions of the securities law about anti-fraud and anti-manipulation,” 

Gensler expressed support for regulating certain sectors of the cryptocurrency market, such as stablecoins, which are digital assets designed to maintain a stable value relative to a specific asset, like the dollar. These assets often act as a connection between traditional finance and the future of finance, and have gained investor interest and the attention of some traditional finance players. However, Gensler expressed caution towards legislation that could weaken the SEC’s authority.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.