The SEC seeks more regulatory enforcement in the crypto sector in 2022, according to chair Gary Gensler.
US Securities and Exchange Commission (SEC) chair Gary Gensler has once again reiterated the government agency’s outlook on crypto tokens, saying the next step is to see security tokens properly classified as such.
As well as talking about private companies and equity firms, the SEC chair briefly touched on the use of crypto tokens as a form of raising money to support innovative technologies within the broader crypto market.
The SEC chair said that crypto tokens and other forms of crowdfunding are free to raise money from the public, but the promoters and sponsors of these offerings should know that the tokens fall within the securities laws.
The premise goes back to the Howey test that looks at whether investors put money into the project expecting a return on their investment based on the efforts of the team.
Crypto promoters to avail all sets of disclosures to investors
Gensler made the comments during an interview on CNBC’s “Squawk Box” on Monday.
He noted that raising funds for a project from the public requires that they (investors) get all the disclosures necessary for them to make wise investment decisions. The securities laws, he added, are there to protect the public against fraud and scammers.
Commenting on the SEC’s agenda for the crypto market, Gensler said the main goal is to bring all security tokens within the purview of the securities laws.
The SEC chair believes that the means of raising funds from investors isn’t an issue, be it through cryptocurrencies or the newer special purpose acquisition companies (SPACs). What’s important for the SEC is to ensure consumers get the protections they deserve.
"We are going to take up again a project around driving greater competition and efficiency in the private fund space," says SEC Chair @GaryGensler. "We are going to see if we can propose some rules to drive more transparency and competition." pic.twitter.com/eeUO6iwbXP
— Squawk Box (@SquawkCNBC) January 10, 2022
On insider trading
Gensler also touched on the issue of insider trading, noting that the SEC will vigorously enforce the laws guiding insider trading, whether by company insiders such as CEOs or members of Congress privy to non-public information.
He however added that all the issues of insider selling are pegged on one word: trust.
"Our system of finance comes down to one basic word and it is trust. Protecting against insider trading whether it is at a company or whether it is a government official, both are important to the basic trust."
The SEC vs. Ripple case
The comments relating to securities laws come even as the SEC’s case against Ripple and its top executives continues. The watchdog brought a lawsuit against Ripple Labs for what the agency said was illegal sales of the XRP token.
Ripple has maintained the token isn’t a security and questioned prior pronouncements that suggested Ether (ETH), the native token on the Ethereum network, wasn’t a security token.
During the interview, Gensler said he could not comment on individual crypto projects, responding to a question on why the SEC does not see ETH as a security token as it does XRP.
The SEC has in the past charged several celebrities for touting various crypto initial coin offerings (ICOs), including Floyd Mayweather, actor Steven Seagal, and DJ Khaled.