SEC’s Gurbir Grewal criticizes cryptocurrency industry’s non-compliance and ‘creative attempts’ to avoid rules.
Gurbir Grewal, the Securities and Exchange Commission’s (SEC) chief enforcement officer, condemned “significant non-compliance” in the cryptocurrency industry and addressed criticisms leveled at the agency over the years.
Grewal, the agency’s executive director, spent about 15 minutes on the cryptocurrency industry Wednesday morning.A two-day “SEC Speaks” event sponsored by the Practicing Law Institute.
“Over the past decade, we have faced significant non-compliance and numerous creative attempts by market participants to evade our jurisdiction, with some claiming we were compensating in our efforts, others claiming we were regulating. It recklessly overstepped the bounds of our authority,” said Grewal, who also pointed out that his views do not necessarily reflect those of the agency.
The cryptocurrency industry has criticized the SEC for what many have called “regulation by enforcement,” with SEC Chairman Gary Gensler arguing that most cryptocurrencies are securities and should be regulated similarly to other investments. Some companies, such as Coinbase, claim that cryptocurrencies are similar to Beanie Babies and lawsuits have been filed in courts seeking clarity on how securities laws apply.
Grewal said the test to determine whether a cryptocurrency is a security is the Howey test. This refers to a 1946 U.S. Supreme Court case that the SEC frequently cites to determine whether assets qualify as investment contracts, i.e. securities.
“This is not an essential ingredient test or a Beanie Babies test or any of the other tests that people in the industry want to make themselves,” Grewal said Wednesday.
The SEC has been clear and consistent about Howey. “There is no secret analysis,” Grewal added.
‘Horse gymnastics’
“At the same time, we have been accused of picking winners and losers, stifling innovation, and pushing cryptocurrency businesses wherever they exist into more favorable foreign jurisdictions,” Grewal said. “It’s been a decade of verbal gymnastics, a backhanded way of saying, ‘We want a different set of rules that apply to everyone else.’”
“The predatory inclusion tactics used by certain cryptocurrency companies to target Black, Brown, and other marginalized communities are deeply troubling,” Grewal said. “Here I am talking about the familiar but hitherto unsupported narrative that cryptocurrencies will somehow increase financial inclusion, uplift the unbanked and underbanked, and help build wealth and increase upward mobility. We’re talking.”
Pew Research Center study Last year, 24% of Asian adults and 21% of Black or Hispanic adults said they had invested in or used cryptocurrency, compared to only 14% of white adults.
“Crypto assets are the only major financial instrument that black Americans are more likely to own than white Americans,” Grewal said. “There is evidence that black and brown investors have been disproportionately harmed during the cryptocurrency market downturn over the past few years.”
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