SEC Chair Gary Gensler Stands Firm on Crypto Enforcement During Senate Hearing

Despite recent legal setbacks for the United States Securities and Exchange Commission (SEC), its Chair, Gary Gensler, remains unwavering in his stance on cryptocurrency regulation. Gensler is set to address lawmakers on September 12, and his determination to assert the SEC’s authority over the crypto space remains resolute.

Over the past two months, the SEC faced significant defeats in cases against Grayscale and Ripple, losses that were seen as significant setbacks for the agency.

In his prepared testimony for the Senate Banking Committee hearing, Gensler will reinforce his belief that crypto assets are, indeed, securities and should fall under the regulatory purview of the SEC. The Senate hearing is centered on the SEC’s oversight in specific areas.

Gensler’s testimony emphasizes the widespread noncompliance with securities laws within the crypto industry, citing numerous issues that have arisen. He draws a parallel to the regulatory landscape of the 1920s before the establishment of federal securities laws.

Gensler continues to assert that the majority of crypto assets can be classified as securities based on the Howey test, a legal framework used to determine whether an asset or transaction qualifies as a security.

“The vast majority of crypto tokens likely meet the investment contract test,” Gensler affirms, underscoring his belief that most crypto intermediaries are subject to securities regulations.

The SEC’s first significant legal defeat came on July 13 when Judge Analisa Torres ruled partially in favor of Ripple, finding that the sales of XRP tokens to retail consumers did not violate federal securities laws. This decision has become a reference point for other crypto companies facing SEC lawsuits and appeals.

The SEC suffered another major loss on August 29 when a judge ruled against the agency in its dispute with Grayscale over the conversion of its over-the-counter Bitcoin Trust into a Bitcoin exchange-traded fund (ETF). The judge criticized the SEC’s rejection as “arbitrary and capricious.”

These high-profile defeats have spurred blockchain-based payments network LBRY, which was previously found guilty of violating securities laws in July, to file an appeal against the ruling on September 7. This move signals LBRY’s commitment to fighting the court’s decision that favored the SEC, a notable shift from its previous intention to wind down operations.

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