Highlights From Gensler's Talk On Crypto Regulation, And All Key Crypto Developments This Week

It was a busy week for cryptos on both the regulatory and corporate adoption front, but the highlight was the talk delivered on Aug. 3 by SEC Chairman Gary Gensler, who laid out his views on crypto at the Aspen Security Forum. Below, are the top takeaways (from JPM's Steven Alexopoulos):

  • Gensler highlighted that the crypto space is currently the “Wild West” where we don’t have enough investor protection. Gensler said the SEC is looking to maximize regulatory protection in the crypto markets and called on Congress to grant the agency more scope and resources to oversee the crypto sector.
  • Gensler placed a heavy emphasis on a need for more regulatory oversight around crypto platforms, including crypto trading platforms, lending platforms, as well as other decentralized finance (DeFi) platforms.
  • A key test used to determine whether something will fall under the SEC’s regulation is the “Howey Test.” The test evaluates an asset with the following: “the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”
  • Gensler anticipates that there will be more filings with regard to crypto ETFs under the Investment Company Act, which provides significant investor protections. He looks forward to the staff’s review of such crypto ETF filings, particularly if those are limited to CME-traded Bitcoin futures (Bloomberg had a follow up to this, "Gensler Gets Wish as Bitcoin Futures ETF Filings Land").
  • On stablecoins, Gensler maintains a similar stance and noted how they may also be securities and investment companies. Gensler said that the SEC will apply the full investor protections of the Investment Company Act and the other federal securities laws to stablecoins.
  • The SEC is also seeking comment on crypto custody arrangements by brokers/dealers and relating to investment advisers.

00:58:04

Paul Brody, Global Blockchain Leader at Ernst & Young, responded to Gensler's speech saying it signals bullish momentum for DeFi on the blockchain ecosystem. Some more takeaways can be found here.

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