Gary Gensler Likens Present Situation To Before The Great Depression, Blames Crypto Industry For Non-Compliance: 'Not Surprising…We've Seen Many Problems'

Securities and Exchange Commission Chair Gary Gensler is preparing to testify on Capitol Hill on Tuesday, and his written remarks ahead of the hearing indicate his unwavering views on crypto.

What Happened: He wrote, “Given this industry’s wide-ranging non-compliance with the securities laws, it’s not surprising that we’ve seen many problems.” 

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Gensler likened the current situation to the 1920s before the implementation of federal securities laws, stating, “It’s reminiscent of what we had in the 1920s before the federal securities laws were put in place.”

The SEC Chair's position on crypto has been clear and consistent, as he expressed that existing securities laws in the US do not need to be revised to accommodate cryptocurrencies. Gensler suggested that “the vast majority of crypto tokens likely meet the investment contract test.”

Regarding the application of the Howey Test to coins like Ethereum ETH/USD, Gensler said in an interview with Intelligencer that “everything but Bitcoin” BTC/USD is considered a security. 

When questioned about Ethereum’s classification as a security or commodity, Gensler declined to provide a definitive answer during a previous appearance before a House Oversight Committee.

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Why It Matters: The distinction between securities and commodities is crucial as it determines the regulatory oversight under either the SEC or the Commodity Futures Trading Commission.

Notably, a New York court ruled against the SEC in a case involving the sale of XRP, stating that certain sales did not constitute the sale of unregistered securities. The SEC also faced another setback in a lawsuit with Grayscale, where a court criticized the agency’s previous denial to convert Grayscale’s $15.6 billion Bitcoin trust into a spot Bitcoin ETF as “capricious.”

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