Troy Paredes, who served as a commissioner at the United States Securities and Exchange Commission (SEC) from 2008 to 2013, suggested that the regulator might be overreaching on what digital assets it considered securities.
Speaking at the TokenizeThis 2024 conference in Miami on May 9, Paredes said SEC Chair Gary Gensler seemed to suggest that the commission had clarity on his views of what constituted a security under the Howey test. However, he said there was still a “jurisdictional question” the SEC needed to address on digital assets.
“I mean, if it’s not a security, then it’s outside the scope of the federal securities laws in the SEC’s jurisdiction,” said Paredes. “The commission, I believe, has taken a very expansive view as to what constitutes a security under the Howey test.”
The former commissioner added that many in and outside of the SEC seemed to be focusing on labeling certain tokens as securities, but they weren’t addressing how to “adapt the regulatory regime” for digital assets. He added there was “a lot of uncertainty” among firms attempting to comply with regulatory requirements.
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Many have criticized the SEC for taking a “regulation by enforcement” approach to crypto firms offering tokens or crypto services to U.S. residents. The commission filed lawsuits against Binance, Kraken and Ripple and may be preparing for an enforcement action against Robinhood after it issued a Wells notice.
The SEC’s actions have prompted a response from many lawmakers looking to restrict the commission’s authority over digital assets. On May 8, a majority in the U.S. House of Representatives voted for a resolution overturning an SEC Staff Accounting Bulletin on banks custodying customers’ digital assets. President Joe Biden said he plans to veto the bill.
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