The annual SEC Speaks event is in full swing today at the Ronald Reagan Building in Washington, DC. This is an SEC marquee event for securities practitioners in good part because it gives senior SEC leaders an opportunity to give updates on current initiatives and priorities of the SEC for the coming year. Chairman Gary Gensler spoke this morning and focused his entire speech on the regulation of cryptocurrency and intermediaries. Enforcement Edge was there and ready to blog.
As we have previously discussed in a client Advisory, the crypto industry has become an increasing focus of the SEC under Chair Gensler.
Some key takeaways from Chair Gensler's speech include the following:
- According to Chair Gensler, the “vast majority” of crypto tokens are securities.
- Consistent with Supreme Court precedent, the SEC will regulate investments by whatever name they are called and whatever form they take. The SEC will look at the facts and circumstances of the investment, not what it is called or what it is labeled.
- Investors deserve disclosures related to these types of investment.
- Stablecoins raise concerns for the SEC. Chair Gensler suggested that the SEC will look at the mechanisms that are used to maintain value—for example, do Stablecoins have revenue sharing, money market or other attributes that may require registration?
- Chair Gensler noted that crypto intermediaries—whether decentralized or not—raise risks and function like exchanges and, in some instances, like broker-dealers.
- The SEC is looking at whether intermediaries need to form separate legal entities—one for an exchange; one for custodial purposes; and one that will operate as a broker dealer.
- Chair Gensler, a former CFTC chair, noted that some entities may require dual SEC and CFTC registration.
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