U.S. Securities and Exchange Commission Chairman Gary Gensler isn’t waiting for new powers from Congress to enforce securities laws against crypto companies, though he said Wednesday it would be good to have more money and additional reach beyond U.S. borders.
Gensler, who declined to specifically talk about failed crypto exchange FTX and its former CEO, Sam Bankman-Fried, said in an interview on Yahoo Finance that the SEC has the basic disclosure and governance requirements in place to hold digital-assets firms accountable. The SEC chief also didn’t directly address questions about whether his agency would push out tailored crypto rules next year, but he insisted that it doesn’t need any.
“The rules are there,” he said. “The law firms know how to advise their clients to comply.”
As the fiery crash of FTX taught harsh lessons about the dangers of running a global platform without walls between customer funds and investment operations, Gensler underlined that crypto firms can’t do everything.
“Your field will not last long outside of public policy norms,” he said. “Some of these platforms have come in and said, ‘We want to continue running a commingled platform. We want to continue doing lending, trading, hedge fund functions, an exchange function, a custody function.’ We said, ‘No, you have to separate it out.’”
Gensler has expanded his crypto-enforcement team, though the agency hasn’t yet dropped a bomb on a major cryptocurrency platform. The court case over whether Ripple’s XRP is a security – and within reach of SEC authority – has been seen as the major lingering question holding the agency back. However, Gensler said Wednesday that a federal judge’s decision last month determining crypto startup LBRY violated securities laws by selling its native LBC tokens was a “very big win” for the SEC’s legal campaign.
So far, the SEC hasn’t directly gone after U.S. exchange Coinbase (COIN) for listing what the agency believes are securities without registering as a national securities exchange. Still, the SEC has – in another recent enforcement action – listed several tokens it considered unregistered securities that were traded on the company’s platform.
"If the SEC has the authority Mr. Gensler claims, why did he fail to uncover the largest crypto Ponzi scheme in US history?" Rep. Ritchie Torres (D-N.Y.), said in a letter this week to the Government Accountability Office requesting a review of the SEC's role with FTX. "One cannot have it both ways, asserting authority while avoiding accountability."
However, Torres, a member of the House Financial Services Committee who is on the Congressional Blockchain Caucus, was also among lawmakers who sent a letter to Gensler earlier this year expressing concerns about how SEC investigators were gathering information from crypto companies.
Whether the SEC wants new laws or not, Congress has made crypto a new priority this year, and lawmakers from both parties are expected to push for the first major crypto legislation in the next session. Most of the preliminary efforts have sought to raise the U.S. Commodity Futures Trading Commission into a prominent role in the oversight of crypto trading.
Gensler’s agency doesn’t need new crypto rules, he argued, adding that what would really help would be more resources and more powers over activity happening in other jurisdictions. The SEC already regulates $100 trillion markets – mainly in stocks, bonds and government securities – and no matter how much attention crypto is getting, he said Wednesday, it’s a relatively small market.
“Worldwide, it’s about $800-ish billion,” he said. “We don’t know the exact number in the U.S., but far smaller than the $800 billion.”
UPDATE (Dec. 7, 2022, 20:43 UTC): Adds letter from Rep. Torres on Gensler's performance regarding FTX