The Chairman of the SEC, Gary Gensler, said that some cryptocurrencies should be treated as securities.
Gensler spoke before the American Bar Association Derivatives and Futures Law Committee, during the Virtual Mid-Year Program, and said that cryptocurrencies whose prices are tied to securities should abide by the same laws as securities.
“Security” refers to a regulated financial product, and since there are tokens in the crypto markets that are backed, collateralized, or directly linked with securities, they should be subject to the same regulations.
Gensler said that initiatives by some crypto platforms to offer tokens that mirror security prices function as derivative offerings, and therefore should be subject to the laws on derivative offerings of securities.
“It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These platforms — whether in the decentralized or centralized finance space — are implicated by the securities laws and must work within our securities regime”.
He then added:
“Then, any offer or sale to retail participants must be registered under the Securities Act of 1933 and effected on a national securities exchange”.
These passages refer, perhaps not coincidentally, to products such as Binance’s stock tokens, which were recently removed from the platform after a warning from the Italian Consob. However, it is not only Binance that offers similar products, and at this point, it is plausible to imagine that any other crypto platforms offering this type of token should at least withdraw them from the US market.
Gensler also warned that the SEC may take action in the future against unregulated platforms that offer these tokens comparable to derivative products on securities.
Lately, it is not only tokens that replicate the prices of stocks, but also stablecoins that are under scrutiny by regulators, particularly those in the US.
A number of stablecoins, which in theory should be collateralized in fiat currency, are in fact not backed 100% by fiat currency, but also partially by securities. This is true for both USDT and USDC, for example, and if Gensler’s point were to stand, the SEC’s policy in this regard could become much more stringent. However, these new financial products would need to be better framed within a regulatory framework that is up to date with new technologies.