Critics worry Gensler of the SEC is pursuing ‘unlimited powers‘ in cryptocurrency regulation

<p>Chairman of the Securities and Exchange Commission Gary Gensler raised eyebrows in the cryptocurrency industry on Tuesday when he refused to rule out regulating stablecoins as securities during a Senate Banking Committee hearing. However, if reformers have their way, stablecoin issuers will face greater regulatory hassles than the SEC.</p> <p>Republican Senator Pat Toomey of Pennsylvania questioned Gensler on whether he believes stablecoins, or cryptocurrencies designed to maintain their value in relation to the US dollar DXY, are securities under the Supreme Court's Howey Test. Gensler failed to provide a definitive answer, stating that "they could very well be securities."</p> <p>While stablecoins such as Tether and USD Coin, have become integral to the market for cryptocurrencies, facilitating trading between popular digital assets such as bitcoin, and ether, financial regulators have expressed concern that they pose a threat to financial stability. Investors treat them similarly to bank deposits or money market mutual funds, while they remain loosely regulated.</p> <p>Treasury Secretary Janet Yellen convened the President's Working Group on Financial Markets in July to address the threat stablecoins represent to financial stability, emphasising "the critical need to act swiftly to ensure an effective regulatory framework is in place."</p> <p>However, Gensler's critics believe that the SEC chairman is hastily asserting his agency's authority over these instruments without adequate legal grounds.</p> <p>“Gensler has made it abundantly apparent that he wants the SEC to have unrestricted authority over crypto,” Dean Steinbeck, general counsel for the blockchain platform Horizen, told MarketWatch in an interview. Steinbeck continued by agreeing with Toomey's explanation of the Howey Test: because those who purchase a stablecoin do not have a reasonable expectation of profit, stablecoins fail the Howey Test and are not securities.</p> <p>While Gensler stated that the Howey Test is a critical criterion for