The two Republican commissioners at the Securities and Exchange Commission wasted little time in mid-December complaining that SEC Chairman Gary Gensler's regulatory to-do list for next year left out any mention of cryptocurrencies.
Gensler's newly released regulatory flexibility agenda "comes up short on furthering the investor protection prong of our mission by failing to provide more clarity on digital assets," SEC Commissioners Hester Peirce and Elad Roisman wrote in a joint statement.
The agenda, the two said, "makes no mention of any regulation with respect to digital assets. In the last several years, this sector has grown in size, complexity, diversity, and investor interest."
Roisman and Peirce continued: "Rather than taking on the difficult task of formulating rules to allow investors and regulated entities to interact with digital assets, including digital asset securities, the Agenda — through its silence on crypto — signals that the market can expect continued questions around the application of our securities laws to this area of increasing investor interest."
They added: "Such silence emboldens fraudsters and hinders conscientious participants who want to comply with the law."
Jim Lundy, partner in Faegre Drinker's Chicago office and a former SEC attorney, said that "rulemaking in the cryptocurrency space by the SEC will be very high-profile, controversial, and may perhaps need coordination with other agencies, such as the CFTC."
Tackling crypto regulation "may have been too ambitious to have on Chair Gensler's first full-year rulemaking agenda," Lundy opined.
Gensler will "engage in regulatory efforts in this space during his tenure, but apparently not in 2022," Lundy said. "Until regulatory efforts are undertaken, the SEC will likely continue to engage in regulation by enforcement in this area."
Gensler's Concerns
Gensler has said that cryptocurrency technology is now essentially a "teenager" and argued that it "will not reach adulthood if it doesn't come within the public policy framework."
The SEC chairman is particularly worried about the cryptocurrency exchanges and has urged them to properly register with the SEC.
Gensler told lawmakers in early October that SEC staffers have initiated "projects" on:
- The offer and sale of crypto tokens.
- Crypto trading and lending platforms.
- Stable-value coins.
- Investment vehicles providing exposure to crypto assets or crypto derivatives.
- Custody of crypto assets.
Regulatory flexibility agendas are projected rulemakings that an agency expects to tackle and are subject to change.
Morningstar warned recently that despite the recent approval of the first crypto futures exchange-traded fund by the SEC, "crypto investing remains an investor-beware zone."
Morningstar continued: "Price volatility, technological hurdles, regulatory gaps, the absence of government-backed insurance, and the scarcity of professional advice provide additional reasons for investors to exercise caution when considering how much to invest in cryptocurrencies and in selecting an exchange platform on which to trade."
