The question of whether crypto should be classified for regulatory purposes as a security or a commodity was left open yesterday, when SEC Chair Gary Gensler refused to give a direct answer regarding Ether at a congressional hearing.
“Actually, all securities are commodities under the Commodity Exchange Act. It’s that we are excluded commodities. But I would agree that a security cannot be also an excluded commodity and an included commodity,” Gensler said.
Ahead of the hearing, the Republican-majority House Financial Services Committee (HFSC) said it is “holding the Commission accountable. From its reckless rulemaking agenda to regulation by enforcement of the digital asset ecosystem to ignoring the capital formation piece of its statutory mission, Chair Gensler’s SEC is threatening American competitiveness. Through a series of letters, Committee Republicans are working to prevent Chair Gensler from continuing to weaponize the SEC as he runs roughshod over process, precedent, and jurisdiction.”
“In terms of digital assets, we could certainly use more resources … there are more things to look at and investigate than we have people on the staff to do.”
Gary Gensler, Chair, SEC
Asked about the SEC’s ability to regulate digital assets due to a 6-7% attrition rate, Gensler said “in terms of digital assets, we could certainly use more resources … there are more things to look at and investigate than we have people on the staff to do”.
A crypto industry heavyweight, Coinbase CEO Brian Armstrong, said at the Innovate Finance Global Summit in London yesterday he would consider moving the company outside the US unless some kind of regulatory clarity is achieved.
The regulatory approach in the US contrasts strongly with that taken in other markets such as the UK, where the government is actively discussing a digital currency framework in attempts to become a “crypto hub”. Hong Kong, Singapore, and the UAE are often cited as exemplary jurisdictions.
“Certain regulators are taking more of a regulation-by-enforcement approach and that’s not helping.”
Brian Armstrong, CEO, Coinbase
“We’re seeing regulatory clarity emerge in Europe with the MiCA legislation. I’ve been meeting with UK government officials and there seems to be a strong movement towards a stablecoin bill. We’re seeing that in Singapore and other countries around the world,” Armstrong said. “That’s really positive and it’s the big thing that will unlock growth in crypto- that regulatory clarity. The US is behind on this. Certain regulators are taking more of a regulation-by-enforcement approach and that’s not helping. We’ve seen great leadership from the PM and City minister in the UK.”
“We have a crazy situation right now where these two federal regulators in the US are making contradictory statements every few weeks about, for example Ethereum,” he added regarding the security vs commodity debate.
When asked about the Wells notice issues in March against Coinbase, Armstrong said “the law is on our side and the SEC has to follow the rule of law … their actions would not be sympathetic to a jury.”
The comment could almost have been a direct riposte to Gensler saying that in 40 years he has “never seen a field that is so noncompliant with laws written by Congress and confirmed over and over by the courts”.