SEC chair seeks increased regulation of cryptoassets

SEC chair Gary Gensler is calling on cryptoasset entities to register with the agency under current securities laws while referencing the possibility of new legislation.

“Nothing about the crypto markets is incompatible with the securities laws,” Gensler said. “Investor protection is just as relevant, regardless of underlying technologies.”

Gensler made the remarks as a part of The SEC Speaks in 2022, an annual event hosted by the Practising Law Institute.

“I look forward to working with crypto projects and intermediaries looking to come into compliance with the laws. I also look forward to working with Congress on various legislative initiatives while maintaining the robust authorities we currently have,” Gensler said. “Let’s ensure that we don’t inadvertently undermine securities laws underlying $100 trillion capital markets.”

Gensler used a history lesson to explain his belief that even without new legislation, most cryptoassets fall under securities laws.

“As Justice Thurgood Marshall put it in describing the scope of the securities laws, Congress painted the definition of a security ‘with a broad brush.’ He further stated, ‘Congress’s purpose in enacting the securities laws was to regulate investments, in whatever form they are made and by whatever name they are called.’

“In general, 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.”

Gensler said investors “deserve disclosure” both from the entities behind cryptoassets and from the intermediaries that deal in crypto transactions. He said the vast majority of cryptoassets fit under the definition of securities, and he added that even ones that may be considered nonsecurity assets — such as bitcoin and some stablecoins — still should be subject to investor protections.

“To the extent the Commodity Futures Trading Commission (CFTC) needs greater authorities with which to oversee and regulate crypto nonsecurity tokens and related intermediaries, I look forward to working with Congress to achieve that goal consistent with maintaining the regulation of crypto security tokens and related intermediaries at the SEC,” Gensler said.

The AICPA recently made recommendations to the IRS regarding its evolving guidance on the tax treatment of cryptoassets.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.