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Gensler’s Observations on Legal Counsel in Crypto

  1. Gary Gensler suggests that crypto projects consulting lawyers could be doing so to conceal illegal securities offerings.
  2. Gensler questions the compliance of crypto service providers with existing financial laws.
  3. Responses from the legal community highlight a potential violation of constitutional rights.

Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission (SEC), made remarks suggesting that crypto projects seeking legal counsel may be attempting to mask illegal securities offerings.

Skepticism towards Compliance of Crypto Services

The SEC Chairman reiterated his skepticism regarding the compliance of crypto service providers with financial laws governing the world’s largest capital market. He compared the agreement between lawyers and crypto entities to the business model of digital asset operators, hinting that the majority of cryptocurrencies could be considered investment securities.

Remarkably, Gensler suggested that a crypto project retaining a lawyer is a security. That’s wrong as a matter of law, not to mention common sense. And it’s a not so subtle and outrageous threat to everyone’s right to consult with counsel.

— Stuart Alderoty (@s_alderoty) November 6, 2023

Stuart Aldertory, Ripple’s Chief Legal Officer, called Gensler’s comments incorrect and emphasized that alluding to the hiring of legal advisors could be interpreted as a violation of rights guaranteed by the U.S. Constitution.

The SEC has brought multiple lawsuits against cryptocurrency entities that it deems part of a non-compliant digital asset industry riddled with scams and failures. The SEC’s case against Ripple resulted in a partial victory for the cryptocurrency company.

A group of judges in the Grayscale v. SEC case also ordered Gensler’s commission to reconsider the company’s request to convert its Bitcoin trust, GBTC, into a spot Bitcoin ETF, a product that the SEC has consistently denied.

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