US SEC Chairman's latest statement: PoS token may be securities
On September 15, Gary Gensler, chairman of the US SEC, took part in the hearing of the Senate Committee on Banking, Housing, and Urban Affairs on "the supervision of the US Securities and Exchange Commission" on the encryption market.
The core principles of the Securities Law apply to all corners of the securities market. Investors and issuers in the crypto market should benefit from the same gold standard that makes our capital markets the most liquid and innovative in the world.
Of the nearly 10000 tokens in the crypto market, I believe the vast majority are securities. The Securities Act covers the provision and sale of thousands of crypto securities tokens, requiring these transactions to be registered or conducted in accordance with available exemptions. Therefore, I have asked SEC staff to work directly with entrepreneurs to register and supervise their tokens as securities in appropriate cases. Given the nature of the encryption investment, I recognize that it may be appropriate to flexibly apply existing disclosure requirements.
The stable currency is similar to and may compete with money market funds, other securities and bank deposits. At present, they are mainly used as a means to participate in the encryption platform, or as a so-called settlement token within the encryption platform. Depending on their attributes, such as whether these instruments pay interest directly or indirectly through affiliates or other means; What mechanisms are used to maintain value; Or how to provide, sell and use tokens in the crypto ecosystem, which may be shares of money market funds or other types of securities. If so, they will need to register and provide important investor protection.
Since most crypto tokens are securities, many crypto intermediaries - whether they call themselves centralized or decentralized (e.g., DeFi) - are trading securities and must register with the SEC in some capacity. I have asked employees to work with crypto intermediaries to ensure that they register each of their functions - exchanges, broker dealers, custody services, etc. - which may lead them to break down their functions into separate legal entities to mitigate conflicts of interest and enhance investor protection.
I also ask employees to cooperate with companies that do business in other well regulated markets and want to enter the encryption market. These traditional financial intermediaries expressed their interest in providing services to investors in the crypto market and abiding by the time tested investor protection rules. Existing encryption security intermediaries also need to comply with investor protection rules. All intermediaries in our capital market should compete in a fair competitive environment and abide by the regulations.
As I said before, a few tokens may be non security crypto tokens, although they may represent a large part of the total value of the crypto market. Therefore, I have asked the staff to recommend a way to allow crypto securities and non securities crypto tokens to trade with each other when registering crypto securities intermediaries. As far as crypto intermediaries may need to register with the SEC and the Commodity Futures Trading Commission (CFTC), I note that we currently have dual registrations in the field of broker dealers and fund advisory.
I look forward to cooperating with Congress on various legislative initiatives related to the encryption market, while maintaining the strong power we currently have. Let us ensure that we do not inadvertently undermine the securities laws of the $100 trillion capital market. The securities law makes our capital market the envy of the world.
Gensler said at the press conference after the hearing that cryptocurrencies and intermediaries that allow holders to "pledge" their PoS tokens may pass the Howey test If an intermediary such as Cryptocurrency Exchange provides pledge services to its customers, it "looks very similar to lending - only the label has changed."
Note: The Howey test was used by the court to determine whether an asset is a security. This hearing coincided with Ethereum turning to PoS, which means that the Ether of PoS may trigger the US Securities Law. However, Gensler did not specifically mention Ethereum when commenting on the pledge and PoS tokens.