SEC Chair Gensler Suggests Lummis-Gillibrand Bill May ‘Undermine’ Market Protections

A bill intended to specify the rules and roles for crypto regulation could inadvertently “undermine” other market protections, Securities and Exchange Commission (SEC) Chair Gary Gensler said Tuesday.

Speaking at the Wall Street Journal’s CFO Network Summit, Gensler suggested many crypto companies are engaging in behaviors overseen by his agency, pointing to companies that offer yield for staking as one example.

Asked about a bill introduced by U.S. Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.) last week, Gensler said he would rather speak to the lawmakers first, but that from his agency’s point of view, “what we wanted to do is to continue to protect the employees’ basic bargain of raising money from the public.”

“Frankly, if I can turn away from the legislation, we don’t want to undermine the protections we have in a $100 trillion capital market. You don’t want our current stock exchanges, our current mutual funds, our current public companies [to] sort of inadvertently by a stroke of a pen say ‘you know what, I want to be non-compliant as well, I want to be outside of the regime’ that I think has been quite a benefit to investors and economic growth over the last 90 years,” Gensler said.

The bill, as set out, would assign responsibility for different parts of the crypto market to different agencies, as well as address a range of other issues such as creating a de minimus tax exemption for small crypto transactions.

His counterpart at the Commodity Futures Trading Commission (CFTC), Rostin Behnam, previously said the bill “does a very good job.”

The CFTC chief has long advocated for his agency to have greater spot market oversight of crypto, citing the volume of transactions conducted in bitcoin and ether, the two largest cryptocurrencies by market cap. Both of these cryptocurrencies are commonly accepted as commodities, rather than securities that the SEC would oversee.

Gensler, in his comments Tuesday, said most crypto exchanges list hundreds of tokens, and “it’s highly unlikely that all of them, 100% are not securities.”

Gillibrand, speaking on CoinDesk TV’s First Mover program last week, said the bill is “clarifying the roles” that the SEC and CFTC have in overseeing crypto, and that the lawmakers had worked with SEC staff in creating the legislation.

It seems unlikely that the bill will pass this year. However, Sen. Pat Toomey (R-Pa.) suggested at CoinDesk’s Consensus 2022 that legislation addressing stablecoins specifically may become law before 2023.