In his most recent crypto remarks, Gary Gensler singled out Binance, Coinbase, and exhorted crypto projects to comply with regulations.
Gary Gensler, chairman of the U.S. Securities and Exchange Commission, used his speech at the Piper Sandler Global Exchange & FinTech Conference to criticize significant crypto exchanges, including Binance, Coinbase, and Bittrex, and to outline loose registration requirements for crypto projects.
Gensler’s comments follow the SEC’s recent litigation against two prominent cryptocurrency exchanges, indicating the regulator’s growing interest in the sector.
Gensler Highlights Compliance Need
Gensler argued that the crypto market’s assets and exchanges are not exempt from regulations, refuting claims that tokens provide utility and can avoid classification as securities.
He emphasized, “Some additional utility does not remove a crypto asset security from the definition of an investment contract.” In addition, Gensler emphasized that to assure compliance, crypto issuers must register their investment contracts with the SEC or meet the exemption requirements.
During his speech, Gensler highlighted the agency’s prior guidance to crypto projects and intermediaries, including the DAO report 2017 and the staff’s ‘Framework for the ‘Investment Contract’s analysis of Digital Assets from 2019.
He noted that over 100 Commission orders, resolved actions, and court decisions have clarified the conditions under which a token offering constitutes a security, citing cases involving Telegram, LBRY, and Kik as examples.
Gensler Attacks Crypto Exchanges in Legal Action
Gensler indirectly refuted the company’s assertion that it was unaware of how to comply with securities laws by referencing the SEC’s recent action against crypto exchanges Binance, Bittrex, and Coinbase. The SEC chief was quoted as saying about the Coinbase CEO’s recent barrage of interviews following the lawsuit:
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.
Nevertheless, Gensler saved his harshest criticism for the Binance exchange. He disclosed that the SEC possesses internal communications indicating that Binance’s chief compliance officer violated U.S. regulations with knowledge.
In addition, unlike other exchange-related litigation, the one against Binance accuses its founder and CEO, Changpeng Zhao, of intentionally mixing user funds with company funds.
Gensler also emphasized that more than merely consulting with the SEC is required for compliance with regulations. He cautioned, “Seeking a multitude of meetings with the SEC during which you’re unwilling to make the necessary changes to comply with the securities laws” is ineffective in achieving the necessary standards.
