Hinting at a potential future crackdown on stablecoins, Gary Gensler — the chair of the U.S. Securities and Exchange Commission — told the American Bar Association this week that cryptocurrencies whose prices are based on traditional assets could be subject to securities law enforcement.

Fast facts

  • Gensler said many crypto exchanges offered tokens which are “priced off of the value of securities and operate like derivatives.”
  • “Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities,” Gensler said. “These platforms — whether in the decentralized or centralized finance space — are implicated by the securities laws and must work within our securities regime.”
  • While Gensler did not mention any particular tokens by name, the remarks seem to be aimed at stablecoins, such as Circle’s USDC or Tether’s USDT, which are coming under increasing regulatory pressure. On Tuesday, Circle published a list of assets that back its stablecoin USDC — 61% of which being U.S. “cash and cash equivalents.” Some of the other assets backing the coin, including money market funds, bonds and commercial paper, are already treated as securities.
  • Gensler warned that the SEC may bring future enforcement should any swaps run afoul of regulatory requirements in this regard, saying “we’ve brought some cases involving retail offering of securities-based swaps.” This could be a nod to previous SEC action against fintech app Abra, which was fined US$300,000 for selling security-based swaps to retail investors last year.