The question of what constitutes security according to US securities laws remains a very volatile issue in the crypto ecosystem today.
When the FTX Derivatives Exchange imploded by filing for bankruptcy last year, Gary Gensler, the Chairman of the United States Securities and Exchange Commission (SEC) was the most blamed regulator that was blamed by the public. The blame centers on the fact that there were red flags that were exhibited by the trading platform, all of which went undiscovered due to the closeness between Sam Bankman-Fried and the regulators.
Speaking in an exclusive chat with Intelligencer’s journalist, Ankush Khardori, the connection between Gensler and Bankman-Fried was highlighted as both met just on about two occasions since he assumed office. One such meeting was back in March last year when a team of executives from FTX and the IEX stock exchange met with the SEC to lay the case for a Federally approved trading platform.
According to Gensler, this proposal was considered dead on arrival as FTX had a significant conflict of interest to request such an exchange.
“I indicated to them they could take their slide deck down on the second slide,” Gensler said in the wide-ranging conversation, “and that I didn’t think that they should – with all respect – that it was not a valuable use of their time.”
The only other meeting between Bankman-Fried and Gensler had occurred back in 2021, serving as the foundation for the claims that the embattled 30-year-old executive had the regulator in his pocket. The accusations against Gensler’s impartiality is even growing particularly with the recent crackdown on Kraken Exchange.
The SEC fined the trading platform the sum of $30 million earlier this month for offering Staking as a Service to US customers. According to Kraken CEO, Jesse Powell, the SEC is merely using the good guys as scapegoats while letting the bad guys walk free.
Gary Gensler on Securities Offering
The question of what constitutes security according to US securities laws remains a very volatile issue in the crypto ecosystem today. While the commission has been drawn in a legal battle with Ripple Labs Inc since late 2020, it might also get embroiled with Paxos Trust over the issuance of Binance USD stablecoin as an unregistered security.
As conflicting as this position seems, Gensler believes the rationale is clear.
“Everything other than bitcoin,” Gensler said, “you can find a website, you can find a group of entrepreneurs, they might set up their legal entities in a tax haven offshore, they might have a foundation, they might lawyer it up to try to arbitrage and make it hard jurisdictionally or so forth.”
According to him, this group of entrepreneurs often find a way to market their tokens to the public who in turn expects some gains from their investment in the long term.
However. the commission wants to spin its position, the outcome of its case with Ripple will undoubtedly set a major precedent for the broader ecosystem in the future.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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