The United States Securities and Exchange Commission (SEC) has been tasked with regulating the cryptocurrency market in the country. The SEC Chair, Gary Gensler, has now said that the regulatory body will recommend a pathway to be followed by cryptocurrency companies in registering tokens.
SEC to recommend a “flexible” pathway for registering tokens
The chair of the SEC said that the commission staff would work with token projects to develop a “flexible” pathway to register their tokens as securities. In a written statement submitted to the Senate Banking Committee, Gensler said that the flexible pathway would allow crypto securities and crypto non-securities tokens to be registered and traded alongside each other.
Gensler added that the nature of cryptocurrency investments made it so that there was a need for flexibility “in applying existing disclosure requirements. Gensler has always insisted that some cryptocurrencies in the market were securities that needed to register with the commission.
In the recent statement, Gensler reiterated this belief saying that most cryptocurrency tokens were securities. He also added that most crypto market intermediaries needed to register with the SEC despite their categorization as either centralized or decentralized. Gensler continued talking about decentralized finance (DeFi), another area that has attracted regulatory attention.
The latest remarks made by Gensler are a softer tone compared to what he said last week. Last week, Gensler dismissed complaints from the crypto industry asking for a clear regulatory framework. While speaking at a legal conference in Washington, he said that the SEC’s voice on crypto matters over the past five years was “pretty clear.”
SEC Chair addresses stablecoins
In the written statement, Gensler also addresses stablecoin. According to the SEC Chair, stablecoins had similar features to money market funds, bank deposits, and other securities and even competed with these assets.
Depending on their features, stablecoins could be treated as shares of a money market fund or any other form of security, according to the SEC chair. Therefore stablecoin issues would be required to register and provide investor protection measures.
Stablecoins have been under intense regulatory scrutiny following the depegging of TerraUSD and several other stablecoins. Since stablecoins are promoted as non-volatile, where their values are pegged to the value of another asset, such as fiat or other cryptocurrencies, they are expected to be a safe harbor for crypto investors during bear markets.
Gensler also added that he had urged the commission staff to work with firms operating in regulated markets but wanted to venture into the cryptocurrency space. Several traditional financial intermediaries have shown an interest in offering services to investors within the cryptocurrency market, and they are mandated to offer these services in compliance with the investor protection rules that have been put in place.
In conclusion, Gensler said that all social trading platforms needed to comply with the guidelines of the capital market. He also added that he was looking forward to working with the US Congress on several legislative initiatives related to the crypto market. He has urged legislatures to ensure that they do not undermine the securities laws governing $100 trillion in capital markets. He added that these securities laws were behind the success of the US capital market.
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