Testifying before a congressional subcommittee on Wednesday, Securities and Exchange Commission chair Gary Gensler fired yet another warning shot at crypto industry leaders.Â
âThe crypto exchanges should come in and register,â said Gensler, âor, frankly, weâre going to continue to bring, use what Congress has given us, in our enforcement and examination functions.â
The statement came in response to questioning from Rep. Steve Womack (R-AR), who expressed his displeasure at what he perceived to be the SECâs enduring failure to create an explicit set of regulations for cryptocurrencies.
Making an analogy to football, Womack cautioned, âBefore an official can throw a flagâdo an enforcement actionâyou gotta know the rules.â
The SEC has, to date, brought more than 80 enforcement actions against crypto asset offerings and platforms. Gensler argued on Wednesday that such actions were well within his agencyâs purview, saying, âI think the rules are actually quite clear that if youâre raising money from the public, and the public anticipates a profit based on the efforts of that sponsor, thatâs a security.âÂ
But the situation may not be so simple.
Historically, the SEC has not clarified which crypto assets it classifies as securities, versus some that itâs said could be considered commodities (and thus outside its jurisdiction). In the same congressional session Wednesday, Gensler referred to Bitcoin as a commodity: âBitcoin, maybe thatâs a commodity token.â Due to the blurred lines posed by cryptocurrencies and crypto assets, many crypto firms fined or subpoenaed by the SEC have expressed frustration at doing their best to follow poorly articulated laws only to later face legal repercussions.
To remedy this issue, Gensler last month stated his desire to create a novel registration and regulation process for crypto overseen by both the SEC and the Commodities Future Trading Commission (CFTC). A process overseen by both bodies could monitor both crypto securities and crypto commodities.
Gensler testified before the House Appropriations Committee on Wednesday to review the SECâs budget for 2023. He argued that more resources were needed to adequately regulate crypto: âI wish we had more to be able to dedicate to this. ... Weâre really out-personed.âÂ
Earlier this month, the SEC announced it was expanding its newly rebranded Crypto Assets and Cyber Unit to over 50 personnel. In his testimony today, Gensler claimed additional resources would be required to protect crypto consumers from unprecedented risk, alluding to the stunning collapse last week of Terraâs algorithmic stablecoin, UST, and native token, LUNA.
âThere was one crypto complex that went from like $50 billion to near-zero just within the last three weeks,â warned Gensler. âThese are highly speculative, volatile, andâI would daresay oftenâthe public is not protected.â