SEC’s Gary Gensler Reiterates Belief That Vast Majority Of Cryptocurrencies Are Securities

Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission, has doubled down on his view that most cryptocurrencies qualify as securities. Gensler added that he doesn’t believe investors have the appropriate disclosures for investing in such assets.

Gensler Strident In His View That Most Cryptos Are Securities

The crypto industry crackdown is continuing swiftly, with popular trading platform Robinhood Crypto joining the growing list of firms issued with a Wells Notice action by the SEC this week.

During an appearance on CNBC’s Squawk Box on Tuesday, Gensler would not divulge any details on the Robinhood case, but he indicated that his agency was going after crypto because it boasts an “outsized” share of financial scams and fraud.

“Crypto is a small piece of our overall markets,” the SEC boss said. “But it’s an outsized piece of the scams and frauds and problems in our markets — because without prejudging any one token, much of this field is noncompliant with the protections of our securities laws.”

He reiterated his stance that most cryptocurrencies fit the definition of securities.

“Many of these tokens are securities under the law of the land (as interpreted by the U.S. Supreme Court). So, we follow that law,” Gensler emphasized.

According to the SEC chair, investors are not receiving the required disclosures about those assets. 

So, Is Ethereum A Potential Security Or Commodity?

Ether — the industry’s second-largest cryptocurrency by market capitalization — has long been debated regarding its classification as a potential security despite the U.S. Commodity Futures Trading Commission (CFTC) constantly classifying it as a commodity.

Gensler first hinted at the potential ether (ETH) designation as a security in September 2022. The SEC boss suggested proof-of-stake (PoS) tokens could be securities, following the Ethereum blockchain’s monumental transition to that security model from proof-of-work (PoW).

When asked about the SEC’s position during the CNBC interview, Gensler refused to answer definitively how ether should be classified.

“All I would say is, to me, the fundamental question is how do we ensure that the American investor is protected?” Gensler opined. “Right now, they’re not getting the required or needed disclosures, and the intermediaries in the center of this rather centralized market generally are conflicted and doing things we would never allow the New York Stock Exchange to do.”

Notably, the SEC is yet to publicly declare ether a security. However, recent reports revealed that the Gensler-helmed commission has considered the cryptocurrency a security for over a year.

The SEC’s position on Ethereum comes at a crucial time, as the top regulator mulls whether to approve or deny several applications for spot ETH ETFs. The SEC has repeatedly deferred its decision on proposals from prominent asset managers, including BlackRock, Fidelity, and Franklin Templeton.

With an important deadline expected in late May, ETF analysts remain pessimistic about the odds of approval.