There is a conscious witch hunt by SEC chair Gary Gensler to point out to the Senate committee that many crypto exchanges could be operating as securities exchanges.
This is a ploy to secure the crypto exchanges and put them under his control.
I would go as far as saying that the very existence of crypto exchanges and him not regulating them makes Gensler look unimportant as they undermine his authority as the watchdog of the securities industry.
One might just brush it off as crypto isn’t that important, but these developments validate the crypto industry as something becoming too valuable to allow operation without the stamp of the SEC.
Don’t blame me for being cynical but boiling this down to money also cuts through many adjacent industries.
It’s just the way of life.
Crypto is becoming lucrative and Gensler doesn’t want to miss out on this golden goose.
Why do I say that?
The SEC basically earns money on any movement on regulated exchanges from buying and selling and everything in between.
Investing with Robinhood is commission-free, now and forever. They don’t charge you fees to open your account, maintain your account, or transfer funds to your account.
However, self-regulatory organizations (SROs) such as the Financial Industry Regulatory Authority (FINRA) charge them a small fee for sell orders.
They charge these fees for all sell orders, regardless of the brokerage. Robinhood passes these fees to customers and remits them to the applicable SROs.
FINRA is required to pay this fee to the Securities and Exchange Commission (SEC) by law. To generate the funds necessary to do so, FINRA passes the fee on to its members, and many of these members, including Robinhood, pass the fee on to customers.
The fee is ultimately intended to cover the costs incurred by the government, including the SEC, for supervising and regulating the securities markets and securities professionals.
The SEC fee is $5.10 per $1,000,000 of principal (sells only) and is rounded up to the nearest penny.
FINRA charges this fee to brokerage firms to recover the costs of supervising and regulating these firms and this fee is rounded up to the nearest penny and no greater than $5.95.
American Depositary Receipts (ADRs) are certificates that represent foreign stocks and can trade on American exchanges. The banks issuing these certificates may charge custodial fees that typically range from $0.01-$0.03 per share.
There are numerous fees involved in participating on official exchanges that are regulated by the SEC.
For Gensler giving his stamp of legitimacy to the crypto exchanges, in turn, he wants fees, plain and simple.
For lack of a better word, these fees allow regulators like FINRA and the SEC to rake in the cash and as we know in this business, money is power.
I only see it as a matter of time before SEC, FINRA, and Commodity Futures Trading Commission (CFTC) add crypto exchanges to its umbrella of fee collecting businesses they oversee.
And I am not blaming them, everyone is in the business of adding to their nest eggs, and SEC, FINRA, and CFTC are no different.
However, ultimately, this is what it’s about, a cash grab and just the knock-on effect of legitimizing crypto is something any asset class would love to boast about.
Just take sports for an example, football leagues are scrambling to become that minor league to the NFL, but the NFL isn’t interested in offering that stamp of approval.
They don’t care if college football and XFL battle it out away from the confines of professional football, and the costs of not having an NFL stamp of approval have been extortionate forcing start-up leagues to collapse.
If the SEC vouches and incorporates large elements of crypto infrastructure under the umbrella in which they oversee, this will start a chain reaction offering an olive branch to many wealthy investors that are on the fence about this whole crypto thing.
Consequently, they would come pouring in guns blazing with that green light with the heft of their capital and the strength of their financial connections.
Gensler announcing that cryptocurrency exchanges may need to register as securities exchanges makes this one step closer to reality.
Gensler stated that the current crypto industry is not operating within regulatory frameworks that protect investors and consumers from illicit activities and he only cares because it’s the SEC and FINRA that aren’t doing the protecting.
I want to remind readers that Gensler has the choice to allow crypto to flourish in a vacuum but then it could get too big to regulate and nickel and dime and he knows that.
He highlighted crypto as an “asset class is rife with fraud, scams, and abuse in certain applications.”
Gensler has no moral high ground on this topic.
The SEC is an organization that allows rampant fraud from Chinese companies listed as ADRs without even a care for protecting US investors.
They harbor these companies in an environment where they do not need to follow American GAAP accounting rules and are not subject to prosecution because employees are on Chinese soil which has no extradition agreement with the US.
Gensler also admitted that the SEC does not have the jurisdiction to regulate cryptocurrencies, he urged Congress to regulate digital asset exchanges.
It sounds like he is more nervous than anyone involved.
Regulation would be a huge win for the crypto universe, but this would infringe on the decentralized concept of the asset class.
Gensler and the establishment like to preach about how unsafe crypto is, but he is part of a system that destroys the value of fiat currency with insane amount of quantitative easing and unchecked inflation.
Thus, does Gensler believe destroying the value of the dollar is something that can be called safe?
GENSLER WANTS A TALK WITH THE CRYPTO EXCHANGES
