Feb 27, 2023

SEC’s Gensler Claims Every Crypto Except Bitcoin is Security

Cryptocurrency lawyers have challenged the recent comments made by Gary Gensler, the chair of the United States Securities and Exchange Commission (SEC), who stated in a Feb. 23 New York Magazine interview that every cryptocurrency except Bitcoin (BTC) is a security that falls under the jurisdiction of the SEC.

Jake Chervinsky, the policy lead at Blockchain Association, a crypto advocacy group, argued that Gensler’s “opinion is not the law” in spite of his claimed authority over the crypto sector. He added that until and unless the SEC proves its case in court for its jurisdiction over each individual token, “one at a time” then it “lacks authority to regulate any of them.”

Lawyer Logan Bolinger also weighed in on the issue, tweeting on Feb. 26 that Gensler’s opinions “are not legally dispositive” — meaning it’s not the final legal determination. Bolinger added that in the United States, “judges – not SEC chairs – ultimately determine what the law means and how it applies.”

The policy lead at advocacy body Bitcoin Policy Institute, Jason Brett, said Gensler’s comments “shouldn’t be celebrated, but feared” and stated, “there are ways to win other than via a regulatory moat.”

Meanwhile, Gabriel Shapiro, the general counsel at investment firm Delphi Labs, outlined in a series of tweets the seemingly impossible enforcement the SEC would have to carry out on the industry to cement its rule. Shapiro analyzed that over 12,300 tokens worth around $663 billion are — according to Gensler — unregistered securities that are illegal in the U.S. and, as mentioned by Chervinsky, the agency would have to file a lawsuit against each token creator.

The SEC had handled crypto in two main ways according to Shapiro: Either fining token creators and requiring the issuer to register, or fining them and ordering the created tokens to be destroyed and delisted from exchanges.

Shapiro said that SEC registration is not only too expensive for most token creators, but there is also no clear path for registration of tokens. He added that it can only mean “everyone pays huge fines, stops working on the protocols, destroys all dev premines, and delists [tokens] from trading. That would mean 12,305 lawsuits.”

“What is the plan? We are all wondering, and billions of American [dollars] are at risk,” Shapiro said.

The crypto industry is now looking to the SEC to see what steps it will take to enforce its regulations. Many in the space have called for the SEC to work with the industry to create clear and reasonable rules for the sale and promotion of NFTs and other web3 assets. This could include creating a framework for NFT marketing, working with a NFT marketing agency, and creating guidelines for selling NFTs. It could also involve setting up a web3 agency to help with the development, promotion, and sale of web3 assets. This would be a positive step forward for the industry, allowing for more transparency and clarity for investors and creators alike.

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