Right now, Gensler told Warren, "I believe investors using these platforms are not adequately protected. The world of crypto finance now has platforms where people can trade tokens and other venues where people can lend tokens. The American public is buying, selling, and lending crypto on these venues, both centralized and decentralized finance platforms."

These various platforms, he continued, "not only can implicate the securities laws; some platforms can also implicate the commodities laws and the banking laws. This raises a number of issues related to protecting investors and consumers, guarding against illicit activity, and ensuring financial stability. A typical trading platform has more than 50 tokens on it."

In fact, Gensler stated, "many have well in excess of 100 tokens. While each token's legal status depends on its own facts and circumstances, the probability is quite remote that, with 50 or 100 tokens, any given platform has zero securities."

In the crypto market, "many tokens may be unregistered securities, without required disclosures or market oversight," Gensler stated. "Certain rules related to crypto assets are well-settled. The test to determine whether a crypto asset is a security is clear."

Other Views

Rep. Patrick McHenry, R-N.C., ranking minority member on the House Financial Services Committee, argued, in a Wednesday statement on Gensler's letter to Warren, that the SEC Chairman's "latest move to ask Congress for jurisdiction over non-securities exchanges is a blatant power grab that will hurt American innovation. Given the distinct nature of digital assets, policymakers must be thoughtful and deliberative in legislating in this space."

McHenry added that his bill, H.R. 1602, the Eliminate Barriers to Innovation Act, which would require the SEC and Commodity Futures Trading Commission (CFTC) to establish a working group on digital assets, would "bring regulatory certainty to market participants and regulators."

The SEC will continue to its authorities as far as they go, Gensler told Warren. "Over the years, the SEC has brought dozens of actions in this area, prioritizing token-related cases involving fraud or other significant harm to investors," he said. "We haven't yet lost a case."

To the extent that there are securities on these trading platforms, Gensler added, "under our laws, they have to register with the Commission unless they meet an exemption. If a lending platform is offering securities, it also falls into SEC jurisdiction."

Regulators, Gensler stated, "would benefit from additional plenary authority to write rules for and attach guardrails to crypto trading and lending. We stand ready to work closely with Congress, the administration, our fellow regulators, and our partners around the world to close some of these gaps."

From: ThinkAdvisor