Gensler Confirms SEC Won’t Ban Cryptocurrencies… But Congress Can

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Gary Gensler, the head of the US Securities and Exchange Commission, confirmed that his agency had neither the authority nor the intention to ban cryptocurrency.

While answering questions during a House Committee on Financial Services hearing on October 5, Gensler emphasized that bans on cryptocurrency do not fall within the SEC’s mandate, saying, “This is up to Congress.”

“It’s a question of how we get that area within the consumer protections for investors that we have, as well as working with bank regulators and others — how do we ensure that the Treasury has that within anti-money laundering, tax compliance,” Gensler said.

“Many of these tokens are not tested for being an investment contract, note, or security,” he added, stressing the need to place crypto “within the SEC’s investor protection purview.”

Gensler also cited “the financial stability issues that stablecoins can raise” as a priority for the agency.

Representative Patrick McHenry took aim at the actions and positions taken by the SEC regarding digital assets under Gensler’s leadership during the hearing, accusing the SEC chief of failing to act in accordance with “the long-established practice of noting commentary on rule-making and procedures.”

“Some of these comments I made raised questions in the market and made things less clear. You apparently made the market-moving statements, ignored rule-making by issuing a statement without due process, and basically dealt rudely with US investors.”

Gensler responded that the Securities and Exchange Commission follows the Administrative Procedure Code.

McHenry also cited comments Gensler made to the committee in 2019 while teaching at MIT and criticized the SEC’s previous rulings classifying bitcoin and ether as commodities.

When asked about his current views on the matter, Gensler said: “I won’t go into any one token, but I think the securities laws are pretty clear — if you’re raising money. […] and the investing public […] Obtaining a reasonable expectation of earnings based on the efforts of others, consistent with securities law.”

Related: US lawmaker proposes safe haven for digital tokens in new bill

The hearing came on the same day McHenry proposed Clarity for the Digital Tokens Act 2021, which relies heavily on the safe haven proposal made by pro-crypto commissioner Hester Pierce in February 2020.

During the hearing, McHenry pressed Gensler about whether he had taken the time to review Pierce’s proposal. While Gensler evaded answering whether he specifically revised Pierce’s proposal:

“Commissioner Pierce and I talked about her thoughts on a potential safe haven. I think the challenge for the American public is that if we don’t oversee this and protect investors, people are going to get hurt.”