Testifying before a congressional subcommittee on Wednesday, Securities and Exchange Commission chair Gary Gensler fired yet another warning shot at crypto industry leaders.
“The crypto exchanges should come in and register,” said Gensler, “or, frankly, we’re going to continue to bring, use what Congress has given us, in our enforcement and examination functions.”
The statement came in response to questioning from Rep. Steve Womack (R-AR), who expressed his displeasure at what he perceived to be the SEC’s enduring failure to create an explicit set of regulations for cryptocurrencies.
Making an analogy to football, Womack cautioned, “Before an official can throw a flag—do an enforcement action—you gotta know the rules.”
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 agency’s purview, saying, “I think the rules are actually quite clear that if you’re raising money from the public, and the public anticipates a profit based on the efforts of that sponsor, that’s a security.”
But the situation may not be so simple.
Historically, the SEC has not clarified which crypto assets it classifies as securities, versus some that it’s said could be considered commodities (and thus outside its jurisdiction). In the same congressional session Wednesday, Gensler referred to Bitcoin as a commodity: “Bitcoin, maybe that’s a commodity token.” 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 SEC’s budget for 2023. He argued that more resources were needed to adequately regulate crypto: “I wish we had more to be able to dedicate to this. ... We’re really out-personed.”
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 Terra’s algorithmic stablecoin, UST, and native token, LUNA.
“There was one crypto complex that went from like $50 billion to near-zero just within the last three weeks,” warned Gensler. “These are highly speculative, volatile, and—I would daresay often—the public is not protected.”