After much ado about the status of some digital currencies, the chairman of the U.S. Securities and Exchange Commission (SEC) maintains that most cryptocurrencies are securities.
Most Cryptos are Securities
There have been arguments over whether digital assets could be classified as commodities or securities. Stakeholders in the U.S. crypto space see assets as commodities because they are meant for transactions.
However, the SEC chairman, Gary Gensler, has previously insisted that most tokens are securities. In a recent interview with CNBC, Gensler revealed that most crypto assets are securities. According to him, the SEC is better placed to regulate the crypto market as a security product.
Furthermore, Gensler noted that the SEC’s mandate is to oversee the activities of high-risk markets. When people gather to raise money in anticipation of profits, the investors need transparency.
And to ensure transparency, the SEC has a core mandate to enforce rules to protect investors. The SEC chair emphasizes the risks involved in the capital market.
He said that those in charge of public funds must be open and disclose information to investors. Capital markets function best where there is accurate and timely information.
Therefore, the SEC is good at what it does to enforce compliance with factual communication. Gensler noted that based on available data, most crypto tokens are securities.
Will Data Prove Gensler Wrong?
According to the cryptocurrency data from CoinMarketCap, there are more than 21,000 cryptocurrencies in circulation. Accordingly, Gensler said that most digital tokens currently in use are securities.
He disclosed that the vast majority of the roughly 10,000 digital coins are security tokens. And as securities, they are under the purview of the existing laws that the SEC is empowered to enforce.
According to him:
“Given that most assets are securities, it implies that many transactions involve securities that should be registered with the SEC.”
Moreover, the SEC chair’s remarks come less than a month after the agency opened a new office to manage crypto dealings. The office will handle the incoming issuer filings, where prospective exchanges are filed with the regulator for approval.
According to the commission, the “Office of Crypto Assets” would be managed by the Division of Corporation Finance’s Disclosure Review Program (DRP). The DRP provides a specialized review of the issuer filing process.
Some crypto industry players have called on the SEC to liaise with the Commodity Futures Trading Commission (CFTC). According to them, both agencies could work together to ensure comprehensive regulation of the crypto market.
Commenting on the suggestions, Gensler added that there is room for cooperation between the two agencies.
Gensler noted that there is currently a joint registrant in the broker-dealer unit involving the two regulators. Thus, a dual registration process is possible where firms register with the SEC and the CFTC.
The broader crypto market has been in a downward trend for most of the year. The prices of most tokens have tanked by over 70% from their all-time highs.