Crypto News: U.S. Securities and Exchange Commission Chair Gary Gensler used his speech at the Piper Sandler Global Exchange & FinTech Conference to criticize major crypto exchanges, including Binance, Coinbase, and Bittrex, and outlined soft guidelines for crypto projects to register with the agency. Gensler’s remarks follow the SEC’s recent lawsuits against two prominent crypto exchanges, signaling the regulator’s increasing focus on the sector.
Gensler Emphasizes Need For Compliance
Gensler argued that the assets and exchanges in the crypto market are not exempt from regulations, thereby debunking claims that tokens provide utility and can evade being classified as securities. He emphasized, “Some additional utility does not remove a crypto asset security from the definition of an investment contract.” Moreover, Gensler pointed out that, to ensure compliance, crypto issuers must register their investment contracts with the SEC or meet the necessary requirements for an exemption.
During his speech, Gensler also highlighted the agency’s previous guidance to crypto projects and intermediaries, including the DAO report in 2017 and the staff’s ‘Framework for ‘Investment Contract’ Analysis of Digital Assets’ in 2019. He noted that over 100 Commission orders, settled actions, and court decisions have clarified the circumstances under which a token offering constitutes a security, citing notable cases involving Telegram, LBRY, and Kik.
Gensler Bashes Crypto Exchanges In Lawsuit
Referring to the SEC’s recent action against crypto exchanges viz. Binance, Bittrex and Coinbase, Gensler indirectly countered the company’s claims of not being aware of how to comply with securities laws. Taking a shot at Coinbase CEO’s recent slew of interviews following the lawsuit, the SEC chief was quoted as saying:
When crypto asset market participants go on Twitter or TV and say they lacked ‘fair notice’ that their conduct could be illegal, don’t believe it. They may have made a calculated economic decision to take the risk of enforcement as the cost of doing business.
However, Gensler reserved his strongest criticism for Binance exchange. He revealed that the SEC possesses internal communications suggesting that Binance’s chief compliance officer knowingly violated US regulations. Furthermore, unlike other lawsuits pertaining to exchanges — the one against Binance — charges its founder and CEO Changpeng Zhao of wilfully comingling user funds with that of the firm.
In conclusion, Gensler stressed that mere engagement with the SEC through meetings is insufficient for adhering to regulations. He cautioned, “Seeking a bunch of meetings with the SEC during which you’re unwilling to make the changes needed to comply with the securities laws” will not be effective in reaching the required standards.
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