The Comparison to the Roaring Twenties

In a striking speech at the Piper Sandler Global Exchange & Fintech Conference on June 8, SEC Chair Gary Gensler stirred the pot by likening today’s cryptocurrency market to the tumultuous stock market of the 1920s. Reflecting on a time notoriously filled with hucksters, fraudsters, and Ponzi schemes, Gensler asserted that’s exactly what the crypto space resembles today. If that doesn’t make you feel all warm and fuzzy, I don’t know what will!

Learning from History: The Role of Securities Laws

Gensler passionately championed the Securities Act of 1933 and the Securities Exchange Act of 1934, arguing that the enactment of these laws was paramount to the thriving securities markets that followed. He firmly believes that the crypto markets deserve the same level of scrutiny and protection, claiming they are not “less deserving of the protections” afforded by these laws.

Utility vs. Investment: A Fine Line

Going further, Gensler stressed that just because a crypto asset has a utility doesn’t mean it escapes the clutches of securities law. He drew on lessons from the Telegram Open Network case, stating, “Some additional utility does not remove a crypto asset security from the definition of an investment contract.” Talk about a disappointing plot twist for all those hoping their utility tokens could live happily ever after!

Separation of Powers: The Key to Compliance

Addressing crypto security exchanges, Gensler outlined the need for separating the functions between exchange, broker-dealer, and clearing operations. He argued that this separation is not only possible but will help mitigate conflicts that arise from their commingling. “It requires some work,” he remarked—because who doesn’t love a good metaphor about cleaning office cubicles?

Facing the Critics: Balancing Innovation and Regulation

Despite Gensler’s hopes for a more compliant crypto landscape, he’s been encountering some serious backlash from industry players. Critics assert that his expansive views on regulatory authority may be driving innovation away from the U.S. It seems like Gensler has found himself on the receiving end of some heavy criticism, especially with the SEC’s recent actions against major crypto exchanges like Binance and Coinbase. Maybe he needs a vacation—or at least some earplugs!