SEC Chairman Gary Gensler Takes on DeFi Platforms in Testimony Before House Financial Services Committee

Gary Gensler, the Chair of the U.S. Securities and Exchange Commission (SEC), will testify before the House Financial Services Committee on April 18, 2023, at 10:00 am ET.

The hearing is titled “Oversight of the Securities and Exchange Commission,” and Gensler will share his personal views on crypto markets and regulation. He makes it clear that his comments reflect his own opinions and not those of the SEC Commissioners or staff.

Gensler’s prepared remarks address the crypto market and emphasize that most crypto tokens are considered securities. He stresses the importance of compliance with securities laws, stating that “it’s the law; it’s not a choice.”

He also points out that crypto intermediaries often combine various functions such as exchange, broker-dealer, custodial, clearing, and lending, leading to potential conflicts of interest and risks for investors.

Gensler argues that crypto investors should benefit from the same protection as other investors and that calling oneself a DeFi platform is not an excuse to defy securities laws.

He highlights the current noncompliance in the crypto market and notes that the SEC has taken action to address this issue through enforcement actions and rule proposals.

In addition, Gensler mentions that the SEC staff has stated their views on public company accounting related to crypto assets and disclosure regarding significant crypto asset market developments. The SEC announced on April 14 that it was reopening the comment period and providing supplemental information for proposed amendments to the definition of “exchange” under Exchange Act Rule 3b-16.

Gensler emphasizes that regulation aims to protect U.S. investors and that forsaking investor protection puts real people’s life savings at risk. He quotes Justice Thurgood Marshall, who said, “Congress’s purpose in enacting the securities laws was to regulate investments, in whatever form they are made and by whatever name they are called.”

In his remarks, Gensler reiterates that nothing about the crypto markets is incompatible with securities laws, and that Congress has given the SEC a mandate to protect investors, regardless of the labels or technology used.

The investing public generally purchases crypto tokens in anticipation of profits and a better future, counting on the efforts of others to generate returns on their investment.