Gurbir Grewal, in a recent address at the annual “SEC Speaks” conference that was held by the U.S. Securities and Exchange Commission (SEC), emphasized the deficiencies of the current cryptocurrency industry’s procedures for implementing compliance. Stating at the event which is conducted by the Practicing Law Institute over two days, he voiced his regards to […]

Gurbir Grewal, in a recent address at the annual “SEC Speaks” conference that was held by the U.S. Securities and Exchange Commission (SEC), emphasized the deficiencies of the current cryptocurrency industry’s procedures for implementing compliance. Stating at the event which is conducted by the Practicing Law Institute over two days, he voiced his regards to non-compliance to internet fraud within the sector. The subject of his speech emphasized the increasingly innovative exploitation of other market participants in order to dodge the regulating system of the SEC for approximately a quarter of an hour.

Grewal’s perspectives are a natural outcome of the tougher stance the regulator take towards cryptocurrency as the industry is increasingly at odds with them. Such conduct on the latter’s part often has resulted in criticism of the SEC which frequently being accused of engaging in so-called “regulation by enforcement” during which the organization sets precedents for regulations through the filing of enforcement actions rather than issuing the clear rules beforehand. This issue has been a core component of the ongoing conflict among different players in the regulatory domain, for whether cryptocurrencies should be regulated the same as securities.

Howey test and crypto regulation 

At the heart of the analytics, Grewal explained the Howey Test, a standard formed from a 1946 Supreme Court case. This test that the SEC uses now classifies whether a particular asset is considered an investment contract and consequently subject to classification as securities. Grewal reaffirmed that in any case of suggestion intent and expectation of profit, the Howey Test should be applied as a yardstick, otherwise other proposed frameworks by the crypto industry will not stand.

“The Howey Test is the test to figure out whether crypto is a security or not,” Grewal declared. This once again illustrated the SEC’s perseverance with this established criterion. He was scathing about this norm, mocking not only direct comparisons of cryptocurrency to Beanie Babies and other such methodologies promoting the view of such exchange instruments as beyond SEC regulation but also being hostile to all the similar approaches, regardless of whether they were coming from or against BTC.

This posture makes the same point as the SEC Chair, Gary Gensler, who always holds on to the view that most of cryptocurrencies have to be regulated as securities. The question of which one the court construes led to the legal challenge, and along with Coinbase, the company drew a parallel between crypto assets and collectibles to oppose labelling of crypto assets as securities. Mr Grewam’s statement though made it as bright as day that he has nothing to do with theses comparative analysis which the SEC is too anxious to apply the Howey Test upon crypto assets as its main assessment factor.

Seeking clarity and compliance

Grewal’s critique does not only encompasses regulatory issues such as the scope of the tests but also it is focused on the problems of honesty in the industry of cryptocurrencies. He has highlighted the violations done in the market and both delusional as well the careful crafting made to avoid the SEC’s oversight role. The attitudes of these individuals provide an evidence of misinterpretation or complete indifference to the legal background of American market.

Contrary to such criticism, Mr. Grewal admitted that the SEC had been castigated for being an enforcement agency without a regulatory framework and the latter having exceeded its authority. He provided information that his opinion didn’t have to do with the official stand of the body but he emphasized the issue still needed to be addressed to achieve more compliance and clear rules and regulations within the crypto industry.

To a great extent, the constant dialog with policymakers from the SEC establishes the groundwork for how cryptocurrency is to be governed in the future. With the increase of time, the industry requirements grow, and clear, consistent guidelines play ever ever-increasing role within. Among other topics Grewal discussed at the SEC Speaks event was the problem and the complexity of establishing a regulatory environment that is consistent and supportive of future developments in the market, with the Howey Test being one instrument for such learning.