The head of the Securities and Exchange Commission (SEC) Gary Gensler recently shared an overview of the agency’s progress in its mission to create a more transparent market. Speaking at the 2023 Securities Enforcement Forum, his speech titled “Partners of Honest Business and Prosecutors of Dishonesty” shed light on contemporary challenges faced by regulators, legal accomplishments, and insights into the crypto market.
SEC’s Achievements and Legal Challenges
Gensler praised the hard work of the “unweary” SEC staff and Commissioners and highlighted the agency’s significant achievements in the past year. Over 780 actions were filed by the SEC, including 500 standalone lawsuits. Judgments totaling over $5 billion were obtained, with $930 million already distributed to victims of bad actors. Additionally, 40 actions were brought against digital asset firms resulting in penalties of around $1.5 billion.
“There is nothing about the crypto asset securities markets that suggests that investors and issuers are less deserving of the protections of our securities laws.”
– Gary Gensler, SEC Chair
Crypto Regulation and Investor Protection
Gensler addressed the criticism that stringent regulations harm the market by referring to a speech made by the first SEC boss, Joseph Kennedy. He emphasized that the SEC aims to be neither prosecutors of honest business nor defenders of crookedness.
Gensler also advocated for wider regulations to protect investors while acknowledging ongoing discussions within the industry. He maintained his position that most cryptocurrencies are securities and should be subject to the same regulations as traditional financial instruments. This includes meeting the investment contract test. However, crypto firms and experts argue against this view, stating that digital assets do not meet all the criteria of the Howey test.
“There is nothing about the crypto asset securities markets that suggests that investors and issuers are less deserving of the protections of our securities laws.”
– Gary Gensler, SEC Chair
Gensler warned against a lack of regulation in the crypto market, citing the potential for scams and bankruptcies to proliferate. He compared the current state of the crypto market to the financial market before regulations were in place.
The Need for Comprehensive Crypto Regulations
Gensler’s stance on considering crypto as securities remains firm. In contrast, digital asset executives have urged Congress to pass a comprehensive crypto bill to address challenges, rather than relying on court rulings for regulatory clarity. Policy watchers in the United States also look to the European Union’s Markets in Crypto Assets (MiCA) regulation as a reference point for cross-border regulations that could enhance investor confidence and reshape the narrative surrounding cryptocurrencies.
