According to Foresight News, Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), said in a speech released before the 2023 Global Exchange and Fintech Conference, "There is no indication that investors and issuers in the crypto-securities market should not be protected by our securities laws. As I have said many times, the vast majority of crypto tokens meet the investment contract test. These tokens are promoted by teams through websites and Twitter accounts. These tokens do not come out of thin air. Crypto-securities issuers need to register their offers and sales of investment contracts with the SEC or meet exemption requirements."
Gary Gensler further stated that since most crypto tokens are subject to securities laws, most crypto intermediaries must also comply with securities laws. If intermediaries do not register, investors will be harmed and the US financial market may also be affected. In other areas of the securities market, exchanges, broker-dealers, and clearing functions are separated, which helps mitigate conflicts that may arise from mixing such services. Cryptocurrency intermediaries may need to separate business lines, develop rulebooks to prevent fraud and manipulation, properly isolate customer funds, mitigate conflicts, or change their clearing and custody methods.
Regarding crypto lending and pledge-as-a-service, Gary Gensler said that in cases over the past few decades, the Supreme Court has made it clear that the economic reality of a product (not its label) determines whether it complies with securities laws. It doesn't matter what assets investors put into a lending or pledge-as-a-service platform (cash, gold, Bitcoin, or anything else). Customers invest their assets through the platform, which then lends or pools them, pledges them, and promises a return. These are classic securities, whether or not cryptocurrencies are involved.
