Gensler of the SEC was both “pleased” and “disappointed” by the decision on Ripple.
On Monday, Gary Gensler, the head of the Securities and Exchange Commission, said that his agency is both happy and sad about a court ruling that said Ripple Labs’ XRP token wasn’t necessarily a security. However, the decision implied that crypto exchanges must still follow SEC rules.
In an exclusive interview with Yahoo Finance, Gensler said, “There is ongoing litigation with a number of these crypto platforms, and these platforms are combining several services that you’ve seen on these crypto platforms, where they could be trading against their customers and bundling up a bunch of services that we wouldn’t allow in any other part of our capital markets;” this was his first interview since a judge decided last Thursday that Ripple’s XRP token was security when it was sold to institutional investors but not when it was sold to the general public and in 2020, the SEC sued Ripple, saying that selling XRP without being listed as security was illegal.
The judge said the big investors would have bought XRP because they thought they would make money from Ripple’s work.
Gensler says the agency is “pleased” with the part of the decision that says the token was security when sold to big investors but “disappointed” in other ways about retail investors.
He also said, “As for the decision, we’re still looking at it.”
Gensler also warned Monday about the dangers of artificial intelligence, pointing out that many companies control most of this technology. If one of them got into trouble, the whole banking system could be less stable.
“AI may make the economy more unstable because it could lead to herding, in which different people make the same decisions because they get the same signal from a base model or data aggregator,” he said. “It could also worsen the interconnectedness of the global financial system’s networks.”
Gensler said that many of the problems that AI could cause in the future for financial safety will require regulators to change how they do things. He said that the advice on risk management will need to be updated because more is required as it is now.
“An after-action report on a financial crisis in the late 2020s or early 2030s may say that we didn’t know everyone was using the same base or foundation model for their mortgage or stock market information,” he said.
Gensler says that AI models are hard to understand and complicated and that financial regulators worldwide must talk seriously about them because they are becoming more critical and used in global capital markets.
Crackdown on crypto
Gensler oversees a broad legal effort to shut down the cryptocurrency business. Since the beginning of 2023, 15 different crypto players have been charged by the SEC with breaking securities laws, and this includes cases against Coinbase (COIN), which is the most prominent digital currency exchange in the US, and Binance, which is the most prominent digital currency exchange in the world.
In both cases, the SEC it was said that the exchanges broke securities law by letting people trade certain digital currencies on their sites.
The SEC’s main point is that some cryptocurrencies are securities and should be controlled by the government in Washington because of this.
The decision about Ripple last week was seen as a win over the SEC in the crypto world.
On hearing the news, several digital currencies increased, including bitcoin (BTC-USD), which hit its best since May 2022.
Coinbase’s stock also went up at the end of last week, and the exchange quickly said it would allow XRP to trade again.