SEC Chair Gensler Says "Vast Majority" of Crypto Tokens Are Securities
SEC Chair Gary Gensler contended that the "vast majority" of cryptocurrency tokens on the market are securities subject to SEC regulation.
In a speech at the Practising Law Institute, Mr. Gensler said that the majority of cryptocurrencies are securities because "the investing public is buying or selling crypto security tokens because they're expecting profits derived from the efforts of others in a common enterprise." As such, he maintained that issuers need to provide full and fair disclosure to investors, in accordance with federal securities laws.
Further, Mr. Gensler said that because crypto tokens are securities, crypto intermediaries are implicit issuers of securities and thus must register with the SEC in some capacity, whether as exchanges or broker-dealers. He warned that because crypto intermediaries often commingle other functions with a market, investors are inherently exposed to a natural conflict of interest. To address this, Mr. Gensler encouraged staff to work with intermediaries to ensure each function is registered separately.
Mr. Gensler acknowledged that "[g]iven the nature of crypto investments . . . it may be appropriate to be flexible in applying existing disclosure requirements. Tailored disclosures exist elsewhere — for example, asset-backed securities disclosure differs from that for equities."
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