A united position of current SEC Chair, Gary Gensler and former chair, Jay Clayton, on how the cryptocurrency market should be regulated suggests that many cryptocurrency issuers "are violating the law by failing to register with the SEC and could be subject to enforcement actions," the New York Times reports.
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The article comes shortly after Clayton, who earlier this year joined Fireblocks' advisory board, interview Gensler at DACOM to discuss the regulatory framework for cryptocurrencies. Gensler repeated Clayton's stand saying that many tokens are "largely" used to fund business, which falls under the "time-tested definitions of an investment contract and are thus under the securities laws."
Gensler's remarks come as the SEC continues its battle with Ripple Labs and its founders, accusing of raising more than $1 billion by selling XRP tokens as unregistered securities. While Ripple CEO, Brad Garlinghouse, believes there is "pretty good progress" in the legal battle, there are still no clear signs the trial will end any time soon.
Besides, Gensler already warned the cryptocurrency market about the upcoming enforcement actions. In September this year, Gensler cautioned in an interview with the Washington Post that "a lot of people are going to get hurt" if the cryptocurrency business fails to follow the rules.
"I do really fear that we will keep bringing these enforcement cases, but there is going to be a problem. There is going to be a problem on lending platforms or trading platforms, and frankly when that happens I think a lot of people are going to get hurt," Gensler said.
Earlier in November, the SEC rejected the proposal from the Cboe BZX Exchange to list the VanEck bitcoin (EXANTE: Bitcoin) spot exchange-traded fund (ETF). The regulator said in its letter that it did not find that the application was consistent with the requirements of the Exchange Act.
Moreover, the regulator emphasized that Cboe offered "no limiting principle," under which the regulator would be required to approve the listing and trading "of any ETP that arguably presents marginally less risk to investors than a direct investment in the underlying asset or in an OTC-traded product."
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