The recent emergence of a video from 2018 where Gary Gensler, the head of the United States Securities and Exchange Commission (SEC), said that cryptocurrencies are not securities and are on par with commodities or cash, has sparked controversy within the crypto community. The video was from Gensler’s “Blockchain and Money” class at the Massachusetts Institute of Technology (MIT) where he taught before he became the SEC chair. During the video, Gensler acknowledged that ICOs may spark a securities debate, but concluded that “three-quarters of the market is not particularly relevant as a legal matter.”
Members of the crypto community have criticized Gensler for being hypocritical in his current role. Coinbase CEO Brian Armstrong responded with a simple “Wow” in reaction to the video, while Erik Voorhees, founder of crypto trading platform ShapeShift, called for accountability, asking, “When does someone get arrested for fraud?” Farokh Sarmad, founder of the Web3 podcast Rug Radio, called Gensler “disgusting”, while others have called on him to provide an explanation behind the change in opinion.
However, US lawyer Preston Byrne has pointed out that Gensler was speaking in a different capacity as a professor compared to his regulatory position at the SEC. Byrne notes that professors and law enforcers work in different capacities and that Gensler should not be held to the same views he had as a professor. Another US lawyer, blockchain specialist Jonathan Schmalfeld, disagreed with Byrne, stating that Gensler’s interpretation of the Howey test should not change by virtue of his capacity.
The controversy highlights the ongoing uncertainty surrounding how cryptocurrencies are classified by regulators. The debate centers around the question of whether digital assets should be treated as securities, commodities, or something else entirely. The SEC has previously taken a hardline stance on cryptocurrencies, defining Bitcoin and Ethereum as securities. However, under Gensler’s leadership, the SEC has hinted at a possible shift in approach towards a more balanced and nuanced view of the crypto industry.
Gensler has spoken at length about the need for greater regulations in the crypto space. During a recent speech, he spoke about the need for a regulatory framework that addresses issues such as investor protection, anti-money laundering practices, and market integrity. He has also been pushing for greater disclosure requirements for digital assets that are offered to investors. However, he has also emphasized the need for regulations that do not stifle innovation in the industry.
The crypto industry is keenly watching how the SEC under Gensler will approach regulation. The industry has been grappling with a patchwork of regulations that vary from state to state, making it difficult for businesses to operate nationally. There is a growing belief that a more coherent regulatory framework will unlock the potential of the industry and pave the way for mainstream adoption of cryptocurrencies.
In conclusion, the controversy over Gensler’s comments highlights the challenges facing regulators in their attempts to classify cryptocurrencies. While the industry continues to evolve at a rapid pace, regulators are struggling to keep up, leading to a lack of clarity and consistency in how digital assets are treated. However, with a growing recognition of the need for greater regulation, there is hope that regulators will eventually develop a more coherent and consistent approach to cryptocurrencies that balances innovation with investor protection.
