Gary Gensler is the head of the United States Securities and Exchange Commission. He confirmed that his agency doesn’t have the authority nor the intention to ban cryptocurrency.
Gensler stressed that the SEC does not have authority to prohibit crypto, while responding to questions at a House Committee on Financial Services hearing on Monday. He stated, “That would be upto Congress.”
Gensler stated that it was a matter of “how we get this field within investor consumer protection that is we have and also working alongside bank regulators — how can we ensure that the Treasury Department does not have it within Anti-Money Laundering and tax compliance.”
He said that many of these tokens meet the criteria of being an investment contract or a note or security. He also stressed the importance of bringing crypto “within investor protection remits of the SEC.”
Gensler noted that the agency should be focusing on “the financial stability problems that stablecoins might raise” as a priority.
Representative Patrick McHenry took aim at the actions and stance taken by the SEC regarding digital assets under Gensler’s leadership during the hearing, accusing the SEC head of failing to act in accordance with the agency’s “long-held practice of noticing comment on rulemaking and procedures.”
“Some of those comments you have made have raised questions in the marketplace and made things less than clear. You’ve made seemingly off-the-cuff remarks that move markets, you’ve disregarded rule-making by putting a statement out without due process, and you’ve essentially run roughshod over American investors.”
Gensler responded that the SEC follows the Administrative Procedures Act.
McHenry also cited comments made by Gensler to the Committee in 2019, while he was teaching at the Massachusetts Institute of Technology in which he criticized past rulings from the SEC classifying Bitcoin (BTC) and Ether (ETH) as commodities.
When asked of his current views on the matter, Gensler stated, “I’m not going to get into any one token, but I think the securities laws are quite clear — if you’re raising money […] and the investing public […] have a reasonable expectation of profits based on the efforts of others, that fits within the securities law.”
The hearing came on the same day that McHenry proposed the Clarity for Digital Tokens Act of 2021, which draws heavily on the safe harbor proposal put forward by the pro-crypto SEC Commissioner Hester Peirce in February 2020.
During the hearing, McHenry pressed Gensler on whether he had taken the time to review Peirce’s proposal. Gensler evaded answering whether he had reviewed Peirce’s proposal specifically, saying:
“Commissioner Peirce and I have talked on her thoughts around a potential safe harbor. I think that the challenge for the American public is that if we don’t oversee this and bring in investor protection, people are going to get hurt.”