What To Expect From the New SEC Chairman Gary Gensler on Cryptocurrency | Kelley Drye & Warren LLP

In April 2021, the Senate confirmed Gary Gensler, President Biden’s nominee, as the brand new chair of the Securities and Alternate Fee (“SEC”). The previous banker was a staunch regulator because the Commodity Futures Buying and selling Fee (“CFTC”) chair below President Obama, and lots of anticipate his propensity for hardline guidelines to proceed because the SEC chair.[1]

Many imagine that Gensler will carry much-needed, constructive change to the digital asset business within the U.S. In contrast to others in authorities roles, Gensler has devoted himself to understanding the applied sciences and economics surrounding cryptocurrencies. Earlier than his appointment, Gensler taught lessons on blockchain and cryptocurrencies as a professor on the MIT Sloan College of Administration. His in depth background in economics, politics, and know-how made him an optimum alternative to move the SEC, and the Senate confirmed him only a month after his nomination.[2]

Gensler’s Stance on the Cryptocurrency World

In Could of 2021, Gensler appeared at a listening to earlier than the Home Monetary Providers Committee, the place he voiced his opinion on a number of SEC regulatory priorities.[3] In response to a number of questions on level, Gensler famous that we should depend on Congress for any substantial growth in cryptocurrency regulation. Gensler defined that as a result of the SEC solely classifies a number of cryptocurrencies as securities (and are thus below the direct purview of the SEC), there’s little that the SEC can do to impact actual change.[4] The continued case between the SEC and Ripple Labs over whether or not the XRP token is a foreign money or a safety additional illustrates the necessity for Congressional intervention.[5]

Gensler additionally famous on the listening to that there’s little or no fraud safety within the cryptocurrency area and never a lot that may be accomplished about those that use cryptocurrencies to evade taxes and help terrorism. Gensler desires the SEC to be technology-neutral so they don’t inadvertently cripple innovation. He believes in technological progress below the watchful eye of the federal government. Up to now, Gensler has advised that America ought to subsume cryptocurrencies into the monetary regulatory system; nevertheless, he has nonetheless not proposed a plan for doing so. Gensler stays dedicated to addressing the rising points inside the cryptocurrency world however maintains a agency conviction that precise change might want to come from Congress.[6]

A Patchwork Strategy to Regulation

Though Gary Gensler’s data and familiarity with the crypto world brings a refreshing change of course to the SEC, he alone can not create a secure setting for crypto customers. As SEC chair, whose mandate is to guard U.S. traders (quite than to manage for a bigger nationwide [or global] viewers), Gensler faces many limitations in taming the crypto market. Whilst Senator Elizabeth Warren (D-MA) referred to as on Gensler to stipulate methods wherein cryptocurrency markets undermine the SEC’s mission to make sure that markets are honest and environment friendly, a scarcity of regulation is just not one thing that Gensler can treatment rapidly.[7] Due to this fact, others have centered on totally different types of regulation to deal with the rising downside.

For one, Consultant Warren Davidson (R-OH) has introduced a bipartisan invoice referred to as the Token Taxonomy Act to the Home.[8] The invoice seeks to ascertain readability within the crypto area and be sure that the event of blockchain know-how stays within the U.S. Many hope that the laws will present a framework and easy path to a extra orderly and safe future for the blockchain and crypto areas.

Second, in March 2021, Representatives Patrick McHenry (R-NC) and Stephen Lynch (D-MA) launched H.R. 1602, the Eradicate Boundaries to Innovation Act of 2021 (which has since handed within the Home of Representatives).[9] The invoice would mandate establishing a working group composed of business consultants and representatives from each the SEC and CFTC to guage the present U.S. authorized and regulatory framework for digital belongings.

Conclusion

SEC Chairman Gensler is broadly anticipated to be a pal to the cryptocurrency world. Not solely is he an professional within the subject, however he understands the underlying know-how and the nuances that permeate the abstruse business. Nonetheless, Gensler is presently restricted in how he can handle the problems surrounding cryptocurrency. Whereas the way forward for cryptocurrency regulation remains to be unknown, Republicans and Democrats alike have prioritized addressing it within the close to future. And lots of imagine that if Congress expands the SEC’s energy, ensuing regulation will present the cryptocurrency area with enhanced shopper safety, integral stability, and much-needed legitimacy. Senator Cynthia Lummis (R-WY) purports that “good laws is on the best way,” however solely time will inform if our legislative physique can enact efficient legal guidelines to deal with the fast-moving crypto world.[10]

This Kelley Drye consumer advisory was written with the help of summer season affiliate Steven W Schlesinger.