In a keynote speech at the 27th annual Financial Markets Conference on May 15, Gary Gensler, the chair of the United States Securities and Exchange Commission (SEC), responded to Coinbase’s plea for clear crypto regulation by arguing that the rules already exist. However, several industry participants argue that the SEC has failed to provide comprehensive guidelines for crypto companies, leaving them without clear instructions on how to operate within the nascent market.
Under the theme “Old Challenges in New Clothes,” the conference hosted various financial authorities and industry players, including Gensler. While his speech primarily focused on other topics, moderator Tom Barkin, President and CEO of the Federal Reserve Bank of Richmond, brought up the SEC’s ongoing court case with Coinbase and questioned whether the agency had fallen behind in cryptocurrency enforcement.
Gensler’s position is that most crypto assets, excluding Bitcoin (BTC), fall under the securities definition of an investment contract. He believes that if the public invests money and expects profit from the efforts of others in a common enterprise, it qualifies as a security.
Consequently, financial intermediaries and nodes within the network must comply with SEC regulations if they offer securities on their platforms, Gensler said.
Crypto companies call for clearer crypto rules from SEC
Coinbase and other crypto firms have repeatedly expressed frustration over the lack of clear regulatory frameworks and the SEC’s approach of “regulation by enforcement.” These firms feel that the SEC has been hostile toward the digital asset industry.
Coinbase’s chief legal officer, Paul Grewal, highlighted the exchange’s concerns about the SEC’s response to their legal action. Grewal noted that the regulator’s stance reinforces their worries and that the SEC’s reply marked the first formal explanation of its views on regulatory clarity.
He emphasized, in a 7-tweets thread on May 16, that the SEC’s reliance on enforcement actions instead of rulemaking indicates that they are in no rush to provide clear guidelines.
Today’s filing may be the first time when the SEC has formally explained in court its views on whether and how the SEC should create rules for the crypto industry. 2/7
— paulgrewal.eth (@iampaulgrewal) May 16, 2023
Furthermore, in a court filing on May 15, the SEC urged the court to reject Coinbase’s request for a new regulatory framework, arguing that it was not obligated to do so. The Commission stated that previous petitions in other areas had taken years before responses were issued, suggesting that the rulemaking process could also be lengthy.
The SEC Chair’s assertion that the rules have already been published falls short of the expectations of the crypto industry. The lack of clear guidelines continues to be a source of frustration for the entire industry, which advocates for regulatory clarity and a more collaborative approach from the SEC. As the court case unfolds, the industry awaits further developments in the ongoing effort to establish regulations governing the crypto market.
