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Gary Gensler, Chairman of the SEC Speech

SEC | Sep 8, 2022

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Joseph Kennedy, the first Chairman of the SEC, had a saying: “No honest business need fear the SEC.

Not liking the message isn’t the same thing as not receiving it.

Crypto Tokens

  • Of the nearly 10,000 tokens in the crypto market, I believe the vast majority are securities (Howey test). Offers and sales of these thousands of crypto security tokens are covered under the securities laws.  Some tokens may not meet the definition of a security — what I’ll call crypto non-security tokens. These likely represent only a small number of tokens, even though they may represent a significant portion of the crypto market’s aggregate value.
  • Some in the crypto industry have called for greater “guidance” with respect to crypto tokens.
  • For the past five years, though, the Commission has spoken with a pretty clear voice here: through the DAO Report, the Munchee Order, and dozens of Enforcement actions, all voted on by the Commission. Chairman Clayton often spoke to the applicability of the securities laws in the crypto space.
  • Investors deserve disclosure to help them sort between the investments that they think will flourish and those that they think will flounder. Investors deserve to be protected against fraud and manipulation. The law requires these protections.


  • Stablecoins have features similar to, and potentially competing with, money market funds, other securities, and bank deposits, and raise important policy issues.
  • As discussed in the President’s Working Group Report on Stablecoins, it is important to ensure that we have appropriate safety and soundness protections, investor protections, and safeguards against illicit activity.

See:  ECB Publishes Macroprudential Bulletin on Stablecoins, Climate Risk, and DeFi

  • Some stablecoins purportedly are backed by reserves of U.S. dollars. Other stablecoins, so-called algorithmic stablecoins, are not backed fully by fiat moneys and bear heightened risks related to whatever mechanisms are used purportedly to maintain a stable value.
  • Depending on their attributes, such as whether these instruments pay interest, directly or indirectly, through affiliates or otherwise; what mechanisms are used to maintain value; or how the tokens are offered, sold, and used within the crypto ecosystem, they may be shares of a money market fund or another kind of security. If so, they would need to register and provide important investor protections.


  • Crypto intermediaries — whether they call themselves centralized or decentralized (e.g., DeFi) — often are an amalgam of services that typically are separated from each other in the rest of the securities markets: exchange functions, broker-dealer functions, custodial and clearing functions, and lending functions.
    • These platforms match orders in crypto security tokens of multiple buyers and sellers using established non-discretionary methods. If that sounds legalistic, that’s because it is — these are the regulatory criteria for being an exchange.

See:  SEC Charges 3 In Crypto Insider Trading Scheme

  • Crypto investors should benefit from exchange rulebooks that protect against fraud, manipulation, front-running, wash sales, and other misconduct.
  • Crypto intermediaries also engage in the business of effecting transactions in crypto security tokens for the account of others, which makes them brokers, or engage in the business of buying and selling crypto security tokens for their own account, which makes them dealers.
  • Finally, many crypto intermediaries provide lending functions for a return.[19] Make no mistake: If a lending platform is offering and selling securities, it too comes under SEC jurisdiction.
  • If you fall into any of these buckets, come in, talk to us, and register.

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