WASHINGTON — Securities and Exchange Commission Chairman Gary Gensler expressed concern Tuesday that efforts in Congress to write legislation for the cryptocurrency industry could harm regulations that govern the broader capital markets.
When asked about a bill introduced last week by Senators Cynthia Loomis (R., Yeo) and Kirsten Gillibrand (D., New York), Mr. Gensler initially objected, saying he would prefer to discuss the proposed legislation with senators. But he then suggested that legislative changes targeting cryptocurrencies could have implications for stock exchanges or mutual funds.
“We don’t want to undermine the protection we provide in a $100 trillion capital market,” Mr. Gensler said at the CFO Network Summit in the Wall Street Journal. “Similar behaviors should have the same treatment.”
Asked if the recent trajectory in cryptocurrency prices has added new urgency to the SEC’s concerns about the market, Mr. Gensler said, “The urgency was highlighted, but the urgency was there.”
The Lummis-Gillibrand bill, which is unlikely to be approved by the current Congress, aims to create a “complete regulatory framework for digital assets,” its sponsors said. One of its provisions will seek to provide more clarity about which cryptocurrencies meet the legal definition of securities that must be regulated by the SEC, a rallying point for the industry.
But the bill would take some cryptocurrencies out of the SEC’s jurisdiction. It would also create new concepts in the nearly 90-year-old securities laws that would allow issuers of some digital tokens to meet lighter disclosure requirements than public companies face.
“We are not looking to extend our jurisdiction,” said Mr. Gensler. But these symbols are presented to the public, and the public hopes for a better future. These are the characteristics of an investment contract,” a type of security.
Gensler’s remarks contrast with comments by his counterpart in the Securities and Exchange Commission’s regulatory sister, the Commodity Futures Trading Commission, which would gain significant authority under the Lummis-Gillibrand Act.
At last week’s event, CFTC Chairman Rustin Behnam said the proposed legislation “does a very good job” of clarifying the distinction between securities and non-securities in the crypto market and in enabling the CFTC to monitor the latter class of assets.
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