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The crypto industry is firing back against SEC Chair Gary Gensler’s comments that decentralized protocols like Ethereum must issue disclosures
Let’s make no mistake – regulators are there for a reason: to ensure compliance and to protect investors.
The Securities and Exchange Commission (SEC) stands out in the United States. However, there are others, like the Commodity Futures Trading Commission (CFTC).
The SEC and CFTC have different objectives, but sometimes, they come together to provide clarity.
The thing is, policies guiding the SEC, for example, appear outdated, considering crypto’s rise and popularity as a new asset class. The Howey Test criteria for determining whether a given asset—physical or digital—is a security have been central to many energized discussions.
The SEC And Growing Demand For Crypto Disclosures
Under the current regime, obligations like submitting disclosures through quarterly filings are suitable only for centralized, public companies. Their shares (securities) trade in centralized bourses like the NYSE and NASDAQ, watched by the strict regulator.
Meta, Alphabet, Tesla, and others must also submit records showing crypto exposure, for instance, if they dedicate a certain amount of capital.
The question is: Do Ethereum, Bitcoin, and the hundreds of top-tier crypto companies have to submit reports?
Appearing in a recent interview, Gary Gensler, the chair of the SEC, thinks they should. Not only that, crypto companies, following Meta and Nvidia, should release earnings reports in a timely manner for investors to comb through.
The reason, Gary explained, is that many of the tokens issued are securities (allegedly). As a result, issuing projects must register with the Commission and provide regular disclosures to holders, who, in this case, are investors.
Earlier, the SEC Chair said crypto is just a small section of a broad sector under the SEC’s purview. The problem, he added, is that crypto is rife with scams and fraud.
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Ethereum, Bitcoin, And Dapps Are Auditable In Real-Time
Following this, the crypto community is pushing back.
In a fiery response, Ryan Sean posted on X, arguing that crypto projects provide disclosures and do so more transparently than public firms.
Considering that popular chains like Ethereum and Bitcoin, for example, are public and auditable, they offer a superior disclosure model.
“Ethereum, for example, issues a decentralized earnings report every 12 seconds,” Sean said.
“This information is available globally to anyone with an internet connection. It’s not just disclosures – it’s arguably better disclosures.”
As mentioned earlier, the emphasis lies on the open-source nature of these disclosures. Unlike traditional SEC filings, all transactions posted on Ethereum, say from Uniswap or Pepe, are traceable.
Accordingly, anyone in the world, including the SEC and other global regulators, can audit the chain and instantaneously verify the financial health of any project in real time.
Because of this feature, Sean added that the “SEC could literally connect its EDGAR database to Ethereum” and “access disclosures” if they want.
This built-in, auditable disclosure permits any token holder to conduct deep dives into any project, with data available every day of the week via platforms like Glassnode, Etherscan, and others.
If anything, this level of granular detail is lacking in traditional finance.
Given what crypto and public blockchain offer, some analysts now think the regulator’s constant attacks on crypto could be a veiled attempt to exert control, not a quest for transparency.
Meanwhile, questions now surround whether Gary Gensler and the SEC are doing more to harm investors’ pockets than rogue developers.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
