Utility claims cannot be used as a shield for cryptocurrencies or exchanges to bypass the scope of securities regulation.
This was stated by the president of the US Securities and Exchange Commission (SEC), Gary Gensler , speaking recently at the Piper Sandler Global Exchange and Fintech Conference.
The comments follow the SEC's crackdown on cryptocurrency exchanges Coinbase COIN and Binance BNB/USD and whether they trade unlisted securities.
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Gensler said alleged non-investment functions by cryptocurrency promoters have not precluded them from being classified as securities.
“Several add-on services do not remove the security of cryptographic assets from the definition of investment contracts,” he said.
However, he acknowledged that tokens created solely for use within a particular blockchain ecosystem may be excluded from this classification.
Gensler also defended the SEC's recent enforcement actions.
Market participants in the cryptocurrency industry cannot claim ignorance or lack of fair notification of the legal implications of their behavior.
He noted that some companies consciously take the risk of treating regulatory action as a calculated business decision.
Gensler has rejected claims that consensus is elusive for crypto platforms, stating that consensus is indeed possible and has been achieved in the past.
He acknowledged that compliance can take some effort, but it's unavoidable simply by engaging in discussions with the SEC without a genuine desire to comply and comply with securities laws.
Meanwhile, Gensler highlighted guidance that the Securities and Exchange Commission (SEC) has issued over the years for projects and brokers to clarify what counts as protecting crypto assets.
He said this information was available to market participants even before he began his tenure at the SEC.
The SEC has released extensive guidance for market participants, such as the 2017 DAO Report and the 2019 Personnel Framework for Analyzing Digital Asset Investment Contracts.
More than 100 commission orders, out-of-court decisions and judgments have increased understanding of when a land offer or sale is considered collateral, including the cases against Telegram, LBRY and Kick.
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