The Securities and Exchange Commission (SEC) has never distinguished itself by a particularly pro-crypto positioning, on the contrary. But things could still get tougher. The American financial policeman has, through the voice of its president, made it known that he considers cryptocurrencies to be financial securities. This could augur an upheaval at the regulatory level. Update on the subject.
The SEC considers the majority of cryptocurrencies to be financial securities
At the end of last week, Gary Gensler, the chairman of the SEC, gave a speech about cryptocurrencies. He explained that in his view, the vast majority of cryptocurrency tokens are financial securities, not currencies or commodities:
Of the almost 10,000 tokens in the crypto market, I think the vast majority are financial securities. The offers and sales of these thousands of crypto securities are covered by the laws in force .
Why is this so important? Because financial securities are strictly regulated in the United States by this same SEC, and if cryptocurrencies fell under this status, it could completely stop many projects.
Financial securities are indeed related to stocks or shares in companies. The rules surrounding them are particularly rigid, so we cannot promote them as we see fit. The legal risks are substantial, and the regulator is particularly attentive. It is therefore the entire functioning of the crypto ecosystem that could be called into question.
What could change
Gary Gensler announces in his speech that he has asked SEC teams to work directly with entrepreneurs so that they can register their tokens as financial securities. And to recall a quote from the first chairman of the SEC:
No honest company should fear the SEC.
Gensler clarified that he is aware of the special nature of cryptocurrency investments and that the SEC could be “flexible” on certain points. Its purpose is to protect consumers :
Investors deserve to be protected against fraud and manipulation. The law requires these protections.
This would affect all “intermediaries” who offer cryptocurrency services including in sectors such as decentralized finance (DeFi).
Concretely, this could put several projects on hold, if the SEC considers that they have sold financial securities without having registered. This is not an empty threat: the financial policeman has already brought down several projects in this way, and caused a thorn in the side of Ripple, for example. The issuer of XRP is still in the midst of a battle with the SEC. More recently, Coinbase suffered the wrath of the regulator.
At the same time, the SEC has started an investigation into all trading platforms in the United States. It would seem that the authority has decided to make a much more aggressive campaign to regulate the sector in this new school year. Of course, the crypto ecosystem is not only based across the Atlantic. But the companies based there are heavy enough to pose a real threat. We will closely monitor the consequences of this case.