S.E.C. Chiefs from Opposing Sides Align On Cryptocurrency Issues

Although the policies of regulators on both the opposing political parties are rarely in agreement to one another, two men have been leading the Securities and Exchange Commission in cryptocurrency. While they may not agree on policy, their approach to the issue is remarkable. The technology and offerings are new, but the old rules apply.

During the Digital Asset Compliance and Market Integrity Summit in New York, Jay Clayton, Republican S.E.C. Chairman under President Donald J. Trump, interviewed Gary Gensler, the current S.E.C. Chief under the Biden Administration.

Mr. Clayton advises crypto companies. Mr. Gensler was a professor at Massachusetts Institute of Technology and taught crypto classes before joining the agency. Mr. Clayton asked his successor if the S.E.C. Mr. Clayton asked his successor if the S.E.C. intended to regulate crypto. Mr. Gensler responded, “I don’t think you mind if I would quote you back to you.”

Gensler stated then a view that the former chairman had long emphasized — one that blockchain companies strongly resist — that cryptocurrency tokens were largely used for raising money for entrepreneurs. He also said that they meet “the time-tested definitions of an investment contract and are thus under the securities laws.”

In fact, Clayton didn’t mind and said: “Yeah. And any other of the array of definitions of a security in addition.

This agreement is important because it indicates that many, if any, of the crypto issuers are not complying with the law by failing registration with the S.E.C. Enforcement actions could be taken against them.

Both finance experts discussed the inconsistency of information between investors and insiders when companies raise funds through unregistered tokens. They stated that registration is intended to correct this imbalance by mandating certain disclosures and that the crypto markets will not flourish if they operate outside of the regulatory framework.

For the record, not all cryptocurrencies are classified as securities. In fact, Bitcoin, the original cryptocurrency, is considered a commodity by our government. 

Furthermore, the decentralized nature of the digital asset relies on a network of high-powered computers run by independent individuals competing for the chance to mine Bitcoin, allowing them to earn a part of the task of solving math problems algorithmically.

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