SEC Chairman Gary Gensler: With the exception of Bitcoin, all cryptocurrencies are securities


In recent months, the United States financial supervisory authority SEC has chosen increasingly harsher tones towards the crypto market and tightened its regulatory measures. The background is probably the events of last year. In the events surrounding Terra (LUNA) and the collapse of the FTX crypto exchange, investors lost a lot of money and confidence was shaken. The SEC, as the highest regulatory authority in the US, also came under pressure. There is an allegation that the SEC should have recognized earlier that something is going wrong at FTX and that customer deposits may not be secured at all.

SEC Takes a Hard Course Against the Crypto Market

In response, the SEC is now increasing its pressure on companies in the crypto market that they believe are violating the law. The company Paxos, which operates the stablecoin BUSD, was recently banned from circulating new digital coins. The allegation, as in other cases, is that Paxos offered and sold unregistered securities. Shortly before that, there was action when the global crypto exchange Kraken halted its promised offering due to investigations by the SEC and also made a high-million dollar payment.

However, according to observers, this could only be the basis for many tough measures that the SEC wants to execute against the crypto industry in order to promote regulation and end the “wild west”, as SEC boss Gary Gensler once put it.

This assessment has now been supported by a new interview that Gensler gave to New York Magazine. There, the head of the authority emphasized, in his opinion, that all cryptocurrencies traded on the market fall under the supervision of the SEC – with the exception of Bitcoin.

Altcoins are “at their core” securities

Gensler argues that all cryptocurrencies, like stocks, are “essentially” classified as securities and therefore subject to SEC jurisdiction and regulation. In his opinion, it is clear that the cryptocurrencies are being issued by a group or company with the aim of generating profits and attracting investments.

Of those projects, Gensler told New York Magazine, “You can find a website, you can find a group of entrepreneurs, they could set up their legal entity in an offshore tax haven, for they could have a basis, they could do it. legally to try to arbitrate and make it difficult in court and so on.” Gensler explained in the interview that cryptocurrency buyers have exactly the same profit motives as shareholders.

4 questions identify security

Is Gensler correct in his assessment? The most famous method of assessing whether a security is involved is the Howey test. On the basis of just 4 questions one should be able to identify if something is a security or not. These questions are:

  • Is it a cash investment?
  • Invest in a company?
  • Is there a profit prospect?
  • Are third parties responsible for generating the profit?

If Gensler is correct in his interpretation, the questions of the Howey test can be answered with “yes” for all cryptocurrencies with the exception of Bitcoin. However, Gensler expressly excluded Bitcoin because, from his point of view, there is no profit-oriented company behind it and the digitally managed cash book (blockchain) technology is at the forefront. According to the latest statements, Ethereum can also be classified as a security, which should disappoint ETH buyers, because there was a different attitude towards the number 2 cryptocurrency by market capitalization.

Will the SEC Sue All Altcoins and Exchanges Soon?

So what do these statements by Gensler mean for the crypto market? In any case, it is expected that the SEC will continue to increase its strictness on the industry and the recent reports of the stable ban on BUSD and the betting ban on Kraken are not all measures being taken by the SEC. becomes.

In principle, the SEC can take legal action against any cryptocurrency and also against all crypto exchanges on the basis of these arguments. According to him, they all offer or sell cryptocurrencies without being registered as securities. Accordingly, all companies could be accused of violating the law through their activities.

A brand new Ripple case for the crypto market

The lawsuit that the SEC is already making against the Ripple company because it alleges that securities are offered and sold without permission could be brand new for the entire crypto industry. Because if the SEC’s position prevails over the US judge’s ruling in this case, this could have a strong impact not only on Ripple, but on crypto companies as a whole. Based on this precedent, it would likely be very easy for the SEC to enforce corresponding lawsuits against Ethereum, Cardano & Co.

This could permanently change the entire market structure of the crypto market. In this case, the companies already established in the market would have to count on sanctions and fines and be subject to strict regulation by the SEC in the future. Your billion dollar business models would suddenly be put to the test. New companies that want to be active in the crypto market would have to face completely different requirements when licensing their offerings. Gensler previously explained to New York Magazine that the runway for crypto companies not registered with the SEC is getting shorter.

The initial strict regulation by the SEC could lead to a very large correction in the crypto market, in which the prices of various altcoins fell. In the event of a ruling in the case of Ripple in favor of the SEC, investors are threatened with large losses on their purchases of cryptocurrencies. It will then take some time before the market slows down again with the new strongly regulated structures in place. In the long term, however, this development could also have positive effects because the more rigorous tests could prevent further incidents like the one with FTX.

Will the price of Bitcoin take an advantage?

While altcoins may be under tremendous pressure, the future of Bitcoin looks bright according to Gensler’s recent statement. Bitcoin could be a big profiteer and even post strong price gains as unsettled investors will withdraw their money from the altcoins and prefer to buy Bitcoin.

Gensler was also positive about Bitcoin technology: “It’s a real innovation,” he said in an interview. At the same time, however, he restricted it: “Personally, I think it is very rare that you want it, but it is possible,” he said. “I don’t think there’s much economic benefit to micro-currency, and we haven’t seen one in hundreds of years. Most of these signs will fail,” Gensler said.

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Cryptocurrencies are a highly volatile, unregulated investment product. Your capital is at risk.

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