SEC’s Double Standards: Crypto Firms Should ‘Come In And Talk To Us’

The chairman of the United States Securities and Exchange Commission, Gary Gensler, is sending a message to crypto projects with securities to go in and register with the SEC to ensure that investors are protected. Coinbase earlier tried to do exactly this, but instead received a notice the SEC has intention to sue them.

Gensler said in a prepared statement for his testimony at the Senate Committee on Banking, Housing, and Urban Affairs scheduled for September 14 that the SEC, was working with the Commodities Futures Trading Commission for investor protection in crypto markets.

He also hopes to develop a policy framework by working with various financial bodies: Federal Reserve, Department of Treasury, Office of the Comptroller of the Currency, and President Joe Biden’s Working Group on Financial Markets:

“I’ve suggested that [crypto] platforms and projects come in and talk to us. Many platforms have dozens or hundreds of tokens on them. While each token’s legal status depends on its own facts and circumstances, the probability is quite remote that, with 50, 100, or 1,000 tokens, any given platform has zero securities.”

According to Gensler innovative technology such as crypto has the potential to be a “catalyst for change” in the financial sector, but not if it continued to stay outside the legal framework. Many crypto firms in the U.S. have argued that the current state is due to a lack of regulatory clarity.

“To the extent that there are securities on these trading platforms, under our laws they have to register with the Commission unless they qualify for an exemption.”

Back in August Gensler was hoping to introduce crypto-related policy changes surrounding token offerings, decentralized finance (DeFi), stablecoins, custody, exchange-traded funds and lending platforms. He has long urged crypto projects to register with the SEC, specifically saying they should “come in” and work with regulators.

“We just don’t have enough investor protection in crypto finance, issuance, trading, or lending. Frankly, at this time, it’s more like the Wild West or the old world of ‘buyer beware’ that existed before the securities laws were enacted. This asset class is rife with fraud, scams, and abuse in certain applications.”

Gensler is scheduled to speak at a full hearing of the Senate Committee on Banking, Housing, and Urban Affairs regarding oversight of the SEC at 10:00 am EST on Sept. 14.

Coinbase earlier tried to “go in and talk to them”

The message that the SEC is sending to crypto companies is somewhat unclear. Last week Coinbase received a notice that the SEC have intentions of suing them should they pursue with a product they earlier tried to open a discussion about with the regulator.

The Nasdaq-listed crypto exchange detailed:

“The SEC told us they consider Lend to involve a security, but wouldn’t say why or how they’d reached that conclusion … In June, we announced our Lend program publicly and opened a waitlist but did not set a public launch date. But once again, we got no explanation from the SEC. Instead, they opened a formal investigation.”

The SEC asked Coinbase for a number of documents, which the company said it “willingly provided.” However, the regulator “also asked for the name and contact information of every single person on our Lend waitlist,” which Coinbase said it has not agreed to provide, for obvious reasons.

Coinbase noted:

“The SEC has repeatedly asked our industry to ‘talk to us, come in.’ We did that here. But today all we know is that we can either keep Lend off the market indefinitely without knowing why or we can be sued … The net result of all this is that we will not be launching Lend until at least October.”

The SEC should clarify what “come in and talk to us” really means.