SEC chair Gensler defends enforcement approach to crypto amid criticism

SEC chair Gary Gensler pushed back against criticism of the agency’s enforcement-driven regulatory approach to crypto during an interview on Bloomberg Technology on Oct. 22.

Responding to criticisms that the SEC has not adapted its approach to the evolving digital asset space, Gensler reiterated the importance of using established laws to protect investors and maintain market integrity.

Enforcement approach

The SEC’s methods have come under increased scrutiny, as critics argue that the reliance on enforcement stifles innovation and leaves companies operating in uncertainty.

Despite these criticisms, Gensler maintained that the current legal framework has been sufficient for nearly a century and remains relevant in regulating both traditional and emerging markets, including digital assets.

He said:

“We’ve benefited for nine decades from robust laws from Congress and rules from various agencies.”

Gensler explained that the SEC’s enforcement efforts are rooted in the fundamental principles of disclosure and conflict prevention. He emphasized that transparency in markets is essential for investor protection and that the lack of disclosure in many crypto projects has led to significant losses for investors.

According to the SEC chair:

“A lot of people have lost money in a field that’s not providing the fundamental disclosure about their projects and investment contracts. If a market’s ever going to have trust, it also needs to come into compliance.”

Gensler added that the SEC will continue to act as it has to protect investors, regardless of the impact on the industry. He said:

“That’s what we will continue to do… And, yes, even if it is related to this newer market where, as I said, all too many people have been hurt, all too many people lost money and lined in bankruptcy court to deal with their claims.”

Court rulings

Gensler was then questioned about the SEC’s policy regulation in the Fifth Circuit Court of Appeals, which Bloomberg Technology’s co-host Ed Ludlow called “kind of a business-friendly court,” and how the regulator adjusts its stance to court decisions.

Notably, the aforementioned court ruled that the SEC “exceeded its statutory authority” by demanding more transparency over fees and expenses from hedge funds and private equity firms.

Gensler replied that the regulator acts within the law and what the courts interpret the law, adding:

“If the courts interpret it differently, we adjust. That’s what we do, it’s part of our great democracy.”

Bitcoin’s Sweet 16

Gensler also acknowledged a milestone for the crypto industry, noting that the 16th anniversary of the Bitcoin whitepaper — commonly attributed to the pseudonymous Satoshi Nakamoto — falls on Halloween this year.

Gensler used this milestone to emphasize that while the underlying technology of cryptocurrencies has evolved, the principles of transparency and investor protection remain crucial.

He framed the SEC’s enforcement actions as a necessary part of ensuring that the industry adheres to the same legal standards as traditional markets.

He further reiterated that decentralized ledger technology is not incompatible with existing securities laws and argued that the current regulatory regime is sufficient to supervise the industry.

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