Today SEC Chair Gary Gensler voiced his own personal remarks at the Aspen Security Forum. Mr. Gensler who is very familiar with crypto and is very familiar with commodity laws, focused on:
- Investor protection in crypto: “Right now, we just don’t have enough investor protection in crypto.”
- Emphasis on what might happen if folks turn a blind eye: “In many cases, investors aren’t able to get rigorous, balanced, and complete information. If we don’t address these issues, I worry a lot of people will be hurt.”
- In his opinion, it sounds like he believes most tokens are “securities” and makes reference to former SEC Chair Clayton statement from 2018: “To the extent that digital assets like [initial coin offerings, or ICOs] are securities — and I believe every ICO I have seen is a security — we have jurisdiction, and our federal securities laws apply.”
- I find myself agreeing with Chairman Clayton. You see, generally, folks buying these tokens are anticipating profits, and there’s a small group of entrepreneurs and technologists standing up and nurturing the projects. I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight.
- Firmly opines his view of Decentralize Finance and how platforms listing multiple tokens are more than likely offering securities:
Next, I’d like to discuss crypto trading platforms, lending platforms, and other “decentralized finance” (DeFi) platforms.
The world of crypto finance now has platforms where people can trade tokens and other venues where people can lend tokens. I believe these platforms not only can implicate the securities laws; some platforms also can implicate the commodities laws and the banking laws.
A typical trading platform has more than 50 tokens on it. In fact, many have well in excess of 100 tokens. While each token’s legal status depends on its own facts and circumstances, the probability is quite remote that, with 50 or 100 tokens, any given platform has zero securities.
- Chair Gensler also provided his personal take on Stablecoins:
How do you trade crypto-to-crypto? Usually, somebody uses stablecoins.
In July, nearly three-quarters of trading on all crypto trading platforms occurred between a stablecoin and some other token.
Thus, the use of stablecoins on these platforms may facilitate those seeking to sidestep a host of public policy goals connected to our traditional banking and financial system: anti-money laundering, tax compliance, sanctions, and the like. This affects our national security, too.
Further, these stablecoins also may be securities and investment companies. To the extent they are, we will apply the full investor protections of the Investment Company Act and the other federal securities laws to these products.
IMO, this is as close as clarity as we are going to get, for the moment. In POKER, you would call this a “TELL”.
Providing, or Requiring some type of Cover to All Vault Owners via a smart contract from a DeFi platform, like Nexus Mutual, or other Cover Protocols. Meaning:
- It will be a requirement to first purchase Cover, and then Stake Cover when opening a Vault.
- Or, use a portion of the collateral to automatically perform a transaction to acquire Cover before end-user is allow to draw DAI.
PROS: Vault Owners will have some protection. MakerDAO will take steps and can iterate on how to protect Vault Owners.
CONS: It will be costly, time-consuming for PE, and some might say that MakerDAO has the ability to mint MKR as an option for downside protection.
- Too Early
- Too Late
Please note–the last Optional Poll question was formulated based on Mr. Gensler stating that the writing of regulatory guidance has already been written on the wall:
"First, many of these tokens are offered and sold as securities.
There’s actually a lot of clarity on that front. In the 1930s, Congress established the definition of a security, which included about 20 items, like stock, bonds, and notes. One of the items is an investment contract."
I will let this Informal/Informative Poll run until 19-08-2021 and hope to hear you voice your opinion–or, Please let me know if you interpreted his statement differently.