U.S. Securities and Exchange Chairman Gary Gensler has won the ire of many in the crypto community by arguing that the vast majority of digital tokens are securities and that their issuers are violating the law by not registering with the agency.
Republican Sen. Cynthia Lummis of Wyoming said Tuesday “I agree with him” on this point, during a live interview with the Washington Post.
The interview, which also featured Democratic Sen. Kirsten Gillibrand, was conducted a day after the pair introduced a comprehensive legislative framework for regulating digital assets.
Lummis emphasized, however, that bitcoin BTCUSD, -3.08% and ether ETHUSD, -2.39%, which account for about 65% of the total cryptocurrency market capitalization, are obviously commodities that should be regulated by the Commodity Futures Trading Commission. She added that because there are possibly as many as 19,000 individual cryptocurrencies and that it’s likely that most are securities.
Gensler has in the past argued that bitcoin is a commodity, though in the past, as a private citizen, he has argued that the issuers of ether violated securities laws when they issued $18 million in ether tokens to the public in 2014.
In 2018, William Hinman, the SEC’s former director of the Division of Corporate Finance said that he believed ether was decentralized enough at the point that it no longer is a security, though the speech was not formal guidance and Hinman is no longer with the SEC.
CFTC Chairman Rostin Benham also spoke at the Washington Post event, saying that “probably hundreds” of cryptocurrencies are in fact securities and should be registered with the SEC.
The Lummis-Gillibrand legislation seeks to chart a path that leaves room for both the CFTC and the SEC to oversee cryptocurrency markets, with a particular coin’s primary regulator determined by what rights or powers a digital asset confers to its holders.
The CFTC would be granted oversight of the spot markets for commodity cryptocurrencies like bitcoin, potentially bringing greater investor protection to markets where critics say manipulation is common.
The Securities and Exchange Commission would retain sole oversight of digital assets that give the holder a right to “profits, liquidation preferences or other financial interests in a business entity,” and are therefore securities.
The SEC would also have a role in regulating digital assets that are not securities by this definition, but which are not fully decentralized and therefore benefit from the entrepreneurial or managerial efforts of others. Such assets would be deemed commodities and overseen primarily by the CFTC, but would be required to furnish disclosures to the SEC twice per year.
Sen. Lummis said she met with Chairman Gensler on Monday, but that he has not yet read the bill.