SEC chair lashes out at “noncompliance” in crypto ahead of Senate hearing

• Gensler blamed the crypto industry’s “wide-ranging noncompliance” for the crises it faced.
• In the last few months, the SEC lost in court against both Ripple and Grayscale.

Despite suffering two setbacks in its court battles, the U.S. Securities and Exchange Commission (SEC) chair Gary Gensler has not backed down from his position on crypto.

Gensler still believes that crypto assets are securities and should be regulated by the SEC. He blamed the crypto industry’s “wide-ranging noncompliance with the securities laws” for the crises the sector faced in the recent months.

The SEC chair compared the situation to one witnessed during the economic depression in 1920s before the securities laws were enacted.

Gensler is going to reiterate the same opinion in the upcoming hearing before the Senate Committee on Banking, Housing, and Urban Affairs on 12 September, as is evident from his testimony.

Gensler also repeated that almost all crypto assets meet the Howey test. It is a legal criterion that determines if an asset or transaction can be deemed a security. He said,

Given that most crypto tokens are subject to the securities laws, it follows that most crypto intermediaries have to comply with securities laws as well.

In the last few months, the SEC lost in court against both Ripple [XRP] and Grayscale. The SEC had alleged a violation of federal securities laws in both of these cases; the court, however, ruled otherwise.

Gensler will also be talking about two of the SEC’s recent proposals. The first is a proposal on custody of crypto assets. The second redefines the term exchange in order to formally incorporate crypto platforms.

Bitcoin, Ethereum — what does Gensler think of them?

The crypto industry is going to closely observe the Senate Committee hearing because of the gravity of subjects under discussion. In particular, it is keen to know if there is any evolution in the opinions of the SEC chair on crypto. However, it seems like Gensler’s views on crypto have only hardened.

Gensler earlier suggested that everything but Bitcoin [BTC] is a security. However, he didn’t explicate whether Ethereum [ETH] is a security or a commodity.

Both of these questions form the bone of contention between the SEC and the Commodity Futures Trading Commission (CFTC).

Critics of the regime have criticized the SEC under Gensler for regulation by enforcement in the face of ambiguous laws on crypto in the U.S.