Newly appointed Securities and Exchange Commission (SEC) Chairman Gary Gensler brought up cryptocurrencies in his first address of the Financial Industry Regulation Authority (FINRA).
When addressing the industry regulatory body, he first mentioned his relationship with FINRA head Robert Cook. He highlighted that they had both mentioned new challenges facing regulators during their confirmation testimonies. These included climate risk and human capital disclosure, as well as cryptocurrencies.
The ‘Spirit of the Law’
After his introductory remarks, Gensler addressed his main theme, describing the motivation behind his work. He recalled the “SEC’s three-part mission to protect investors, facilitate capital formation, and what links the two: fair, orderly, and efficient markets.” Then he emphasized working in the best interest of investors.
“So, if you’re asking a lawyer, accountant, or adviser if something is over the line, maybe it is time to step back from the line,” he said somewhat ambiguously. “Remember that going right up to the edge of a rule or searching for some ambiguity in the text or a footnote may not be consistent with the law and its purpose.”
This implication could have been a veiled reference to the SEC’s ongoing lawsuit with Ripple Labs. Many perceive the indictment to be flawed in its approach, and detrimental to the legitimate development of crypto regulations. This opinion is not only shared by Ripple investors, but by industry notables.
A petition sent to the new SEC Chairman asked that he take a different approach from his biased predecessor. It asked Gensler to include the crypto community in crafting legislation for the burgeoning industry, rather than simply litigating it.
Even the Wall Street Journal shared this perspective. The influential business newspaper chastised the regulator for “preferring to announce its positions through individual enforcement actions.” They added that this approach was “creating danger for currency developers and retail investors.”
Ultimately, Gensler urged his audience to “think about the spirit of the law,” when enforcing it.
Towards the end of his statement, Gensler reinforced that regulators should “use technology and data analytics to surveil the markets and enforce the law.” Ironically, the technology behind cryptocurrencies could avail them in this regard, despite the SEC’s skepticism towards the emerging asset class.
Former acting Director of the U.S. Central Intelligence Agency, Michael Morell released an independent paper recently about the use of cryptocurrencies for illicit activities. Morell highlighted two major takeaways from the study. First, that the concerns over the use of bitcoin (BTC) in illicit finance are significantly overstated. The second was that blockchain analysis is actually highly effective intelligence gathering tool for fighting crime.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.