The US Securities and Exchange Commission argues that cryptocurrency trading and lending must be registered and regulated like other traditional security exchanges. The SEC Chair, Gary Gensler, announced that his staff is working on addressing this idea at the conference on digital assets, cryptocurrency, and blockchain held by the University of Pennsylvania Carey School of Law.Â
The SEC Chair said that several tokens on the crypto platforms meet securities demands. He also continued saying that these crypto platforms play a similar role to regulating security exchanges, which is why the investors on these platforms must be protected the same way.
There is no reason to treat the crypto market differently
Gensler stated that the cryptocurrency market is about $2 trillion with more than $100 billion in daily trading volume. He also said that amongst all the available crypto-only exchanges, the top five platforms account for over 99% of all the trading. When talking about crypto-to-fiat transactions, 80% of trading comes from two crypto platforms. And as per the decentralized finance (DeFi) platforms, the top five crypto platforms account for 80% of the total trading.
Gensler said, “The SEC’s remit is overseeing the capital markets and our three-part mission: protecting investors, facilitating capital formation, and maintaining fair, orderly, and efficient markets. Regulators also care about guarding against illicit activity. There’s no reason to treat the crypto market differently just because different technology is used. We should be technology-neutral.”
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Many of the tokens meet the definition of securities
Gensler observed that a typical trading platform has dozens of tokens in it, many of which meet the prerequisites of securities. He also pointed out that most of these crypto tokens involve entrepreneurs raising money from the public to make up for profits, exactly what typical investment contracts and securities do.
He then cited the Howey Test that asserts that an investment contract exists when there is an investment of money in an enterprise in anticipation of profits to be derived from the efforts of others. As most crypto tokens indeed behave like investment contracts under the Howey Test, thus, the government must treat them as securities to be registered with the SEC.
