No More Fragmented Crypto Rules, SEC Chief Confirms Formal Talks With CFTC

In a recent inter­ac­tion with the Finan­cial Times, US Secu­ri­ties and Exchange Com­mis­sion Chair Gary Gensler remarked that a uni­fied approach by finan­cial agen­cies can ensure that a frag­ment­ed reg­u­la­to­ry frame­work doesn’t pro­vide loop­holes for cryp­to players.

Gensler told FT, “I’m talk­ing about one rule book on the exchange that pro­tects all trad­ing regard­less of the pair — [be it] a secu­ri­ty token ver­sus secu­ri­ty token, secu­ri­ty token ver­sus com­mod­i­ty token, com­mod­i­ty token ver­sus com­mod­i­ty token” for investor protection.

That said, the agency chief also acknowl­edged that he has spo­ken with his coun­ter­parts at the Com­mod­i­ty Futures Trad­ing Com­mis­sion (CFTC) to strike a for­mal deal for trans­paren­cy and leg­isla­tive clar­i­ty in the dig­i­tal asset space.

It is not CFTC v SEC

Ear­li­er this month, Sen­a­tors Kirsten Gilli­brand and Cyn­thia Lum­mis had intro­duced the first major bipar­ti­san leg­is­la­tion for cryp­to assets, includ­ing Bit­coin and Ethereum, to be treat­ed as com­modi­ties under the CFTC.

Under the bill, a cryp­tocur­ren­cy would be clas­si­fied as a “com­mod­i­ty” or “secu­ri­ty” depend­ing on “the pur­pose of the asset and the rights or pow­ers it con­veys to the consumer.” 

Mean­while, the com­modi­ties watch­dog has been simul­ta­ne­ous­ly push­ing to become the pri­ma­ry reg­u­la­tor for the cryp­to indus­try for quite some time.

Gensler, who is also the for­mer head of CFTC, stat­ed in the inter­view that he was work­ing on a “mem­o­ran­dum of under­stand­ing” with the CFTC over cryp­to juris­dic­tion. This essen­tial­ly means that all vir­tu­al assets deemed to be secu­ri­ties will be under the juris­dic­tion of the SEC, but the secu­ri­ties agency will report­ed­ly send that infor­ma­tion over to the CFTC” if the asset rep­re­sents a commodity.

Gensler believes, “By get­ting that mar­ket integri­ty enve­lope, one rule book on an exchange will real­ly help the pub­lic,” he added that “If this indus­try is going to take any path for­ward, it will build some bet­ter trust in these markets.”

Crypto mom sees industry jointly regulated

Last year, SEC Com­mis­sion­er Hes­ter Peirce, who is fond­ly called “Cryp­to Mom” had opined that the cryp­to space doesn’t nec­es­sar­i­ly need a sep­a­rate reg­u­la­tor. She had remarked, “We have such a frag­ment­ed reg­u­la­to­ry sys­tem for finan­cial prod­ucts and ser­vices gen­er­al­ly, that I don’t know that adding anoth­er reg­u­la­tor would be my top preference.”

While Peirce echoed the same con­cerns as Gensler, she also called for joint super­vi­sion of the vir­tu­al asset space. She under­lined that while the SEC is equipped to over­see the retail mar­kets, the CFTC has been reg­u­lat­ing the futures mar­kets, just like the bank­ing reg­u­la­tors have over­looked their respec­tive sectors.

Notably, Fed­er­al Reserve Chair­man Jerome Pow­ell had also called for sec­tor-spe­cif­ic reg­u­la­tions this year. Mean­while, the US Trea­sury had also pre­vi­ous­ly pub­li­cized its cryp­to cam­paign under the Finan­cial Lit­er­a­cy Edu­ca­tion Com­mis­sion to edu­cate the pub­lic on the risks of invest­ing in the dig­i­tal asset class. 

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