Exchanges Were Warned: SEC Chair Gensler Defends Crypto Crackdown

SEC Chair Gary Gensler defends the recent crackdown on crypto exchanges, asserting that they were adequately warned.

Gary Gensler showing no emotions, ''safety first'' sign behind him.
  • SEC Chair Gary Gensler defends the recent crackdown on crypto exchanges, stating they were warned.
  • Gensler’s stance has significant implications for crypto intermediaries and the broader crypto market.
  • The future of crypto regulation under Gensler’s leadership could reshape the crypto landscape.

The news from the Securities and Exchange Commission’s (SEC) latest crackdown still reverberates through crypto. The SEC Chair Gary Gensler recently defended his agency’s lawsuits against Binance and Coinbase. 

In his speech at the Piper Sandler Global Exchange & Fintech Conference on June 8, 2023, Gensler went after crypto exchanges. He criticized them for failing to register and comply with securities laws, arguing that this deprives investors of critical protections.

Gensler Goes After Binance, Coinbase

Gensler dismissed claims from exchanges that stated they lacked “fair notice” that their conduct could be illegal. 

“When crypto asset market participants go on Twitter or TV and say they lacked ‘fair notice’ that their conduct could be illegal, don’t believe it,” Gensler said. Instead, Gensler claims they made a “calculated economic decision” not to comply. 

Gensler also addressed the claims by Coinbase and Robinhood that they tried to comply with the SEC and failed. Gensler expressed that crypto compliance is possible, but it takes work. 

In his statement, he suggested that some exchanges sought meetings with the agency but were unwilling to make the necessary changes to comply. 

“It’s not just a matter of ‘paying lip service to desire to comply with applicable laws,” Gensler exclaimed. “Or seeking a bunch of meetings with the SEC during which you’re unwilling to make the changes needed to comply with the securities laws,” he added. 

To back up his statement, Gensler cited the leaked chat logs from a former Binance Compliance Lead. 

“Again, these crypto entities know the rules,” Gensler claimed. “As Binance’s chief compliance officer put it bluntly to a colleague in 2018, “We are operating as a fking unlicensed securities exchange in the USA bro.” 

Gensler Explains SEC’s Views on Crypto Assets

Gensler highlighted the need for crypto security issuers to register the offer and sale of their investment contracts. He reiterated his view that most crypto assets are securities, as their value depends on the efforts of others. 

“As the courts in the Telegram case and others have said,” Gensler added, “some additional utility does not remove a crypto asset security from the definition of an investment contract.” 

“The investing public generally buys these crypto assets,” Gensler explained, “at least in part, anticipating profit based on the efforts of those token issuers.

The U.S. Securities and Exchange Commission (SEC) has recently intensified its crackdown on cryptocurrency exchanges, with Coinbase and Binance being the most notable targets.

On June 6, 2023, the SEC filed a lawsuit against Coinbase, one of the largest cryptocurrency platforms in the U.S. The regulator alleged that Coinbase traded at least 13 crypto assets considered securities and should have been registered accordingly.

In addition to Coinbase, the SEC targeted Binance, the world’s largest cryptocurrency exchange by trading volume. The lawsuit against Binance was filed a day before the action against Coinbase, marking a dramatic two-day enforcement spree by the SEC. 

On the Flipside

  • Robinhood and Coinbase both claim they tried to register with the SEC with little help from the agency. They claim the SEC rebuked their efforts to register. 
  • Crypto exchanges claim that SEC’s strict enforcement stifles innovation in the crypto space. 

Why This Matters

The SEC’s regulatory take on crypto will substantially impact the market.  This is because the agency is in charge of regulating crypto assets in the US, the largest crypto market in the world. 

Read more about the damning chat logs from Binance that got it in trouble with the SEC:

‘No Way We’re Clean’ – Damning Evidence in SEC Case Against Binance

Read more about how KuCoin is navigating regulators and user demands:

Exchanges Can’t Ignore Meme Coin Communities – KuCoin

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
David Marsanic

David Marsanic is a journalist for DailyCoin who covers the intersection of crypto, traditional finance, and government. He focuses on institutionalized crypto entities like major cryptocurrency exchanges and Solana, breaking down complex topics into easy-to-understand writing. David's prior experience as a business journalist at various crypto and traditional news sites has enabled him to maintain a critical approach to news while adhering to high journalistic integrity standards.