U.S. Representative Tom Emer of Minnesota questioned Supreme Education Council Chairman Gary Gensler during a recent meeting.
The exchange took place as part of a Securities and Exchange Commission oversight hearing before the House Financial Services Committee. Emmer has expressed strong opposition to Gensler’s position that the majority of cryptocurrency tokens are securities.
The legal classification of cryptocurrencies has been one of the main disagreements with US regulators – as exemplified by the US Securities and Exchange Commission in the ongoing Ripple case.
However, Gensler, despite being sworn in in April 2021, about five months after the Ripple case was brought, remains steadfast in sticking to the former president’s position on Ripple and cryptocurrencies in general.
But why does Gensler keep sticking to that line?
Are cryptocurrencies securities, commodities or currencies?
Classification of cryptocurrencies has implications for how they are treated in law.
As the sector has grown, global regulators have become increasingly active in tightening the screws in recent years.
But in the case of the US, critics say there is no clarity on what constitutes security, especially since current legislation dates back to the 1930s and does not fit easily with how cryptocurrencies operate.
The question is, are cryptocurrencies actual currencies? Or is it an asset and requires the same treatment as a commodity? Or should they be treated like shares, as collateral?
Properly categorizing digital assets will have consequences for how the industry is regulated. Ultimately, this will affect how the sector matures and grows.
The big fear among cryptocurrency advocates is that any advantages of owning a digital asset will be regulated away, leaving no practical reason to invest in the first place.
Actor Emmer dunks in Gensler
Representative Emmer has been one of the most active voices in the crypto space in the US government.
In the opening, Emer said that the main topic of his questioning was understanding why Gensler insisted that most cryptocurrency tokens are securities. He started by asking if a crypto project registered as security with the SEC could trade on the stock market, such as Nasdaq, etc.
Gensler changed the question by saying that it depends on whether the stock market accepts the proposal. Emer was quick to step in by saying that the answer is no, which would support the idea that cryptocurrencies are not like stocks, and therefore are not like stocks.
Emer also noted that continuing to follow this logic would harm the investors who are supposed to be protected by the SEC. What would the Securities and Exchange Commission do to avoid this situation, Emer asked.
In response, Gensler said the Securities and Exchange Commission will remain cooperative in working with all parties. However, he said that they mostly fit the definition of offering an investment contract when referring to crypto projects.
As such, which implies that the SEC must ensure that it complies with the Securities Act.
“They are entrepreneurs and computer scientists who collect money from the public, and the public expects profits. That is why Congress paints it with a broad brush.”
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