China’s latest round of crypto crackdown inadvertently caused some market observers to raise questions about what the response of the U.S. Government would be. Market observers were curious as to whether the U.S. would adopt a similar regulatory approach or go contrary to China and embrace cryptocurrencies.
Some form of comfort has arrived from an unexpected quarter as, during a House Committee on Financial Services hearing, SEC chair Gary Gensler asserted that his agency had no intention to ban cryptocurrencies. He also pointed out that the agency’s current authorities did not grant such powers, hence it was only up to Congress to ban the asset class. He made the statement in response to Rep Patrick McHenry’s pointed questions on the stance taken by the SEC regarding digital assets.
Following that, he reiterated that the government agency’s most prevailing concerns about the crypto-industry were to bring them into compliance with consumer protection best practices.
“It’s a matter of how we get this field within the investor consumer protection that we have and also working with bank regulators and others…how do we ensure that the Treasury department has it within anti-money laundering, tax compliance,” Gensler said.
In the past, the SEC has come under strong criticism for its stance on cryptocurrencies that have failed to meet the expectations of market participants. The crypto-market had already written off former SEC chair Jay Clayton as he failed to meet their expectations of providing safe harbor and clarity for the crypto-industry. It was initially hoped that Gensler, with his background in cryptocurrencies while he was a lecturer at MIT, would make the SEC take a favorable stance on crypto.
Nonetheless, this has failed to materialize as under Gensler, the top regulators have already brought several legal actions against crypto-businesses that have been received with growing distrust from the industry including the ongoing Ripple lawsuit and its recent threat to Coinbase.
Despite his latest assurance that the commission cannot and will not ban cryptocurrencies, the catch may be that it will still go after a lot of cryptocurrencies that it deems to be “unregistered securities.” Gensler’s statements in previous times and even currently, allude to this.
This is already apparent with the SEC argument in its lawsuit against fintech company Ripple for the issuance of its XRP token. The case, which is currently hanging on the hinges, has the potential of giving the SEC a precedent to go after many other cryptocurrencies.
One observer, Attorney Jeremy Hogan has pointed out that cryptocurrencies that had ICO sales were in the most danger of increased SEC scrutiny. According to Hogan’s analysis a few cryptocurrencies such as Cardano and Polkadot, despite having ICO’s were not in direct danger as they held their ICO sale outside the U.S., but the SEC could still touch them by going after US exchanges that facilitate its trade.