The Senate subcommittee session on the fiscal year 2024 budget of the U.S. Securities and Exchange Commission (SEC) witnessed the testimony of SEC Chairman Gary Gensler. Gensler addressed the pressing issues surrounding the unregulated nature of the cryptocurrency sector and the need for additional resources to combat abuses in emerging financial markets.
Gensler highlighted the risks faced by investors who are currently engaging in speculative investments within the crypto space, often referred to as the “Wild West” due to the lack of adequate regulations. He emphasized the urgent need for regulatory oversight to prevent potential harm to investors’ hard-earned assets.
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Gensler’s Case Study: Ripple and XRP?
One of Gensler’s major concerns is the rapid growth and proliferation of tokens, estimated to be between 15,000 and 20,000 in number.
According to Gensler, many of these tokens fall under the category of investment contracts, which falls outside the jurisdiction of the Commodity Futures Trading Commission (CFTC), a regulatory body Gensler previously chaired. He emphasized the importance of considering these tokens within the framework of securities laws, which were established back in the 1930s.
Indirectly referring to Ripple, XRP, and other security lawsuits pending in the court, Gensler said if you are collecting money from someone, it falls under securities laws established in the 1930s.
Transparency of Blockchain
Concerns were also raised regarding the transparency of blockchain technology, which Gensler believes American investors are currently not adequately provided with. While acknowledging the potential utility of blockchain technology, he stressed the importance of ensuring transparency measures to protect investors’ interests.
During the session, Gensler refrained from naming specific tokens that lie outside the SEC’s jurisdiction. However, he highlighted that the majority of tokens exhibit characteristics of investment contracts while mentioning that Bitcoin, in contrast, incorporates anti-fraud features.
Question Regarding SEC’s Actions Towards FTX Founder
In response to a question regarding the SEC’s actions towards FTX founder Sam Bankman-Fried, Gensler explained that he couldn’t disclose enforcement-related details. However, he emphasized that the crypto space as a whole operates under models that would not be permissible under traditional securities regulations.
As the conversation continues, further updates will be provided to capture the ongoing developments and discussions in the Senate subcommittee session on the SEC budget.
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