Securities and Exchange Commission Chief Enforcement Officer Gurbir Grewal condemned the crypto industry's “serious violations” and cited criticism leveled at the commission over the years.
Grewal, head of the agency's enforcement division, spoke to the crypto industry for about 15 minutes Wednesday morning.wo-day “SEC Speaks” event sponsored by the Practical Law Institute.
“Over the past decade, we have faced serious violations and numerous creative attempts by market participants to circumvent our jurisdiction. , some claim that they are regulated by enforcement agencies, while others claim that we are “somehow recklessly exceeding our authority,'' Grewal said. . Mr. Grewal also pointed out that his own views do not necessarily reflect those of government agencies.
The crypto industry has criticized the SEC for what many refer to as “enforcement regulation,” but SEC Chairman Gary Gensler has argued that most cryptocurrencies are securities and cannot be compared with other investments. They argue that they should be regulated in the same way. The case has gone to court, with some companies such as Coinbase arguing that cryptocurrencies are similar to Beanie Babies, and others seeking clarification on how securities laws apply.
Grewal said the test to determine whether a virtual currency is a security is the Howie test, which is frequently cited by the SEC to determine whether an asset qualifies as an investment contract and therefore a security. He referred to a 1946 U.S. Supreme Court case.
“This is not an essential ingredients test or a Beanie Baby test or any other test that industry players would want to create themselves,” Grewal said Wednesday.
Grewal added that the SEC has been clear and consistent about Howie and there is “no secret analysis.”
“Word gymnastics”
“At the same time, we have been accused of picking winners and losers, stifling innovation, and relegating crypto businesses to more favorable foreign jurisdictions, regardless of where they reside.” Grewal said, criticizing the crypto industry for what he described. It's “a decade of verbal gymnastics, just a backhanded way of saying, 'We need different rules that apply to everyone else.'”
“The predatory inclusion strategies of certain crypto organizations toward Black, Brown, and other marginalized communities are deeply disturbing,” Grewal said. “What I'm talking about here is that cryptocurrencies somehow promote financial inclusion, uplift the unbanked and underbanked, help them build wealth, increase upward mobility. This is about the popular but so far unsubstantiated theory that it helps people.
Pew Research Center study Last year's survey found that 24 percent of Asian adults and 21 percent of Black or Hispanic adults said they had invested in or used cryptocurrencies, compared with 14 percent of white adults.
“Cryptocurrency is the single major financial instrument that Black Americans are more likely to own than white Americans,” Grewal said. “There is some evidence that black and brown investors have been disproportionately harmed by the downturn in the crypto market over the past few years.”
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