It is such a strange approach. On the one hand, I completely sympathize with Gensler’s view that virtually all of crypto should be under the jurisdiction of the SEC:
- He is an ambitious financial regulator, and so he wants to have power over this big and interesting area of finance.
- He is more or less completely right on the law: This stuff is all securities, so the securities regulator should regulate it.
- He is right to worry: Lots of crypto stuff is scammy, or at least risky and under-disclosed, so as a consumer protection matter the SEC should demand more disclosure and fewer scams.
On the other hand, if you are an ambitious financial regulator who wants to regulate crypto, you have to regulate crypto! You have to put in the work! You have to sit down to try to understand how the crypto market operates, what investors need to know, and what is required to encourage useful capital formation. You have to write rules that anyone can read and that create some plausible path for how crypto developers can register their tokens and how exchanges can trade them. And then you have to focus your enforcement efforts on actual consumer protection, going after the crooks instead of just the people who are naive enough to walk into your office.
