Crypto Regulation ‘Enforcement’ Addressed During Gensler Speech

U.S. Securities Exchange Commission Chair Gary Gensler made several references to crypto regulations during his address at the Securities Enforcement Forum.

In a speech emphasizing the necessity of enforcement, Gensler said the SEC’s approach has been consistent. To Gensler, this means that crypto regulations need to be applied consistently, “regardless of the entity, the technology, or the business model.”

“For example, we hear terms like ‘decentralized finance’ (DeFi), ‘currency,’ or ‘peer-to-peer lending,’” Gensler said. “Make no mistake — regardless of the label or purported mission, we will be looking at the economic realities of a given product or arrangement to determine whether it complies with the securities laws.”

Gensler also made a veiled reference to the SEC’s case with Ripple and XRP during a portion regarding high-impact cases. He called such cases important because they change behavior in the rest of the market by sending a message. “Some market participants may call this ‘regulation by enforcement,” Gensler said. “I just call it ‘enforcement’.”  

Congressmens’ letter to Gensler

Earlier this week, Gensler received a letter from a pair of US Congressmen, asking the SEC to consider approving a bitcoin spot exchange-traded fund (ETF). In the letter, Congressmen Tom Emmer and Darren Soto question why the financial regulator is comfortable approving a derivatives-based bitcoin ETF but not a bitcoin spot ETF. 

Being directly based on the asset, they argue that bitcoin spot ETFs offer investors more protection than ones based on derivatives. Additionally, the approved ETFs could impose substantially higher fees on investors due to the premium on bitcoin futures and rolling the contracts each month, they added.

The letter also addressed the SEC’s perceived concerns about approving either a bitcoin spot or futures ETF, citing the potential for fraud and manipulation in the bitcoin markets. Because this concern would have to apply to both spot-based and futures-based ETFs, the Congressmen argue that approval of the futures ETFs implies that the regulator’s issues have been allayed.

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