Twitter Community Shares Controversial Video of SEC Chairman’s 2018 Views on Cryptocurrency
SEC Chairman Gary Gensler’s 2018 statement that cryptocurrencies, except for Bitcoin, are not securities and are on par with cash and commodities, has resurfaced on Twitter recently, causing a stir in the crypto community. The video was taken during a lecture on Blockchain and Money at MIT when Gensler was still a professor there and supervising large investment banks regarding the Libor rate-rigging scandal.
In the video, Gensler stated that initial coin offerings (ICOs) did not violate US securities law, and although they were controversial, they were not a legal issue. He also claimed that “three-quarters of the market is not securities, just commodities, cash, and crypto” and cited the US, Canada, and Taiwan as examples of jurisdictions that comply with the Howey Test.
However, this perspective contradicts Gensler’s statements after becoming SEC chairman last year. He has repeatedly emphasized that all cryptocurrencies except Bitcoin are securities, and the agency even used the Howey Test to affirm that Proof-of-Stake coins, ICOs, and DeFi protocols violate federal securities laws.
The Howey Test is a legal test issued by the US government in 1946, which defines assets as securities if they meet four criteria:
- An investment of money
- In a common enterprise
- With the expectation of profit
- To be derived from the efforts of others
While the classification of cryptocurrencies is still under debate, the resurfacing of Gensler’s video shows the inconsistency in his stance. The crypto community has reacted strongly, with Coinbase CEO Brian Armstrong commenting “Wow” on a post by crypto researcher @ZK-shark.
— Brian Armstrong 🛡️ (@brian_armstrong) April 26, 2023
ShapeShift founder Erik Voorhees asked, “When will someone be arrested for fraud?” in a tweet on April 25, while Farokh Sarmad, founder of the Rug Radio podcast, used even harsher language, calling it “disgusting.” Meanwhile, blockchain engineer @JD called on the SEC chairman to provide an explanation for the change in his position.
Blockchain lawyer Jonathan Schmalfeld believes that Gensler’s interpretation of the Howey Test should not change with his position. “When I speak to clients about an issue, there are three questions to answer: What do I think the law is, what do I think the enforcers think the law is, and how will the courts interpret it? These aren’t things that can be changed just because someone has a different title,” he said.
Gary Gensler’s statement has been challenged in a rather unfavorable situation for him. On April 15th, Representative Warren Davidson proposed a bill to remove SEC Chairman from his position due to his disagreement with Gensler’s policies on cryptocurrencies. Hester Peirce, a former SEC Commissioner, shared Davidson’s views and criticized Gensler for undermining the potential of new technologies.
Recently, the Coinbase exchange filed a lawsuit against the agency for failing to respond to the exchange’s questions since July 2022. Coinbase has requested that the SEC answer the 50 questions and establish a comprehensive and transparent regulatory framework for crypto.
Read more:
- Binance’s Attempts To Hire SEC Chairman Gary Gensler As Advisor Revealed In WSJ Report
- Charles Hoskinson Slams Gary Gensler’s Remarks On Crypto Regulation As ‘A Lie’