SEC’s Gensler Highlights Disclosure Failures in Crypto, Ethereum Co-Founder Accuses Regulators of Stifling Innovation

May 10, 2024

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler criticized the cryptocurrency industry this Tuesday, claiming a widespread lack of essential disclosures and stating that investors are not receiving the information legally owed to them, sparking concerns amid heightened regulatory scrutiny.

Addressing the industry following a Wells Notice issued to Robinhood’s crypto arm, Gensler emphasized the widespread failure in providing crucial information to investors. He stated, “The field of crypto assets, many of those tokens are securities under the law of the land as interpreted by the U.S. Supreme Court. So we follow that law, and you, the investors, are not getting the required or needed disclosures about those assets.”

While deflecting specific questions about Ethereum’s classification, Gensler focused on broader issues within the crypto sector, underscoring the discrepancies in operational standards when compared to traditional exchanges. “To me, the fundamental question is, ‘How do we ensure the American investor is protected?’ And right now, they’re not getting their required or needed disclosures, and the intermediaries in the center of this rather centralized market generally are conflicted in doing things we would never allow the New York Stock Exchange to do,” Gensler explained.

In stark contrast, Joseph Lubin, Ethereum co-founder and CEO of Consensys, accused the SEC of deliberately hindering technological advancement to safeguard the existing financial system. Speaking at a major industry event, Lubin criticized the SEC’s tactics. “The SEC appears to have reclassified Ether as a security without telling anybody that that’s the case. They are going about a strategic series of enforcement actions rather than open discourse and clear rulemaking,” he stated.

Lubin suggested that the SEC’s aggressive enforcement might be a strategic move to bolster its stance against potential challenges, particularly concerning the approval of Ether spot ETFs. “We believe that there’s a flurry of activity designed to enable them to say that their action wasn’t capricious in the very likely event that they deny the Ether spot ETFs,” he added, noting the significant improvements in the crypto ecosystem’s scalability and usability, which are attracting substantial attention and capital.

He further speculated that the migration of traditional banking customers to innovative, decentralized financial platforms is causing alarm among established financial institutions. “The SEC probably doesn’t want to see a wave of innovation that will really transform the landscape,” Lubin concluded, highlighting the ongoing conflict between new financial technologies and established regulatory frameworks.

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1 Comment

  1. This was never about protecting the investors.

    Where was SEC in FTX other major collapses where an actual large-scale organisation holding customers assets was involved?

    This is indeed a targeted attack campaign on crypto industry as a whole.

    If SEC wanted to protect the people – they would be establishing a clear set of rules designed for crypto industry from the scratch for all to follow – not try to fit a 21st century industry of vast depth and breadth with multitude of varying applications into a box designed for 20th century assets.

    If SEC wanted to safeguard people – they would be working together with crypto companies to rectify any past misgivings and set them on the right course in the future rather than investigate them quietly for a year only to suddenly pounce on them trying to bring them down.

    I wonder how does such behaviour by SEC is not classified by market manipulation. The same investors SEC is claiming to protect are going to suffer from such enforcement action when the token price that they suddenly attack drops.

    Why instead as soon as they have issues and questions about particular token they come to the people responsible and start an honest conversation?

    – Look. We looked at your token and we have potential issues with this and this and this. Lets work together to rectify them so the investors can again be safe going forward…

    Do it in the open so that other tokens which are about to go through the same path can learn from existing experience of those that have already gone through it.

    Enforce by teaching.

    Not teach by enforcing.


    No One (has spoken)

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