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SEC chair Gary Gensler is continuing to be clueless about digital assets. Deeming “everything else other than Bitcoin" as "a security," Gensler has held a rather muddled view of crypto. The SEC has even attempted to claim global jurisdiction of all Ethereum, which might or might not be a security or commodity, and the status of XRP continues to hang in the balance.
In Gensler's latest challenge, one New York Representative questioned whether the SEC chair classified Pokémon cards as securities. Speaking at a U.S. House Committee on Financial Services, Ritchie Torres asked Gensler, “Suppose I were to purchase a Pokémon card, would doing so constitute a security transaction?”
BREAKING: GARY GENSLER CONFIRMS THAT THE PURCHASE OF A @Pokemon CARD DOES NOT CONSTITUTE A SECURITY TRANSACTION, BUT STUMBLES WHEN ASKED ABOUT THE PURCHASE OF A TOKENIZED @Pokemon CARD pic.twitter.com/KLJZf4o1yv
— DEGEN NEWS 🗞️ (@DegenerateNews) September 27, 2023
“You can purchase a Pokémon card—I don’t know what the context is, but if you’re just purchasing a Pokémon card, that's not a security,” Gensler replied.
"If I was to purchase a tokenized Pokémon card on a digital exchange via a blockchain, is that a security transaction?" Torres pressed.
“I’d have to know more,” Gensler replied.
"So for you, the process of tokenization is what transforms a transaction into a security transaction? I thought you were technology-neutral," Torres questioned.
"If the investing public is anticipating profits based upon the efforts of others and they're exchanging funds, that's the core of the Howey Test," Gensler attempted to clarify.
Speaking to Decrypt, Torres described Gensler's answers as "incoherent as his overall approach to regulating crypto.
"The manipulation of securities law that has become his modus operandi is an open invitation to arbitrary enforcement," he added.
“Even though dhair Gensler pretends to be ‘technology-neutral,’ the tokenized Pokémon hypothetical reveals a profound prejudice against blockchain technology.”
Tokenization is at the forefront of the industry, enticing tradfi players to build products that leverage real-world assets. Even the tokenization of real estate is becoming a hot topic. As Blackrock’s CEO Larry Fink said, "Tokens are the next generation for markets."
Just like other digital assets, tokenized assets are facing (often unjust) scrutiny from regulators. If the SEC is struggling to determine what Bitcoin and Ethereum are, tokenized real world assets will open a brand new can of worms for the regulator.
Tokenized Pokémon cards are just the tip of the iceberg.
Elsewhere:
- Xbox Crypto Wallet: Unredacted documents from the FTC's case against Microsoft's acquisition of Activision show that there could be a crypto wallet feature coming to the next-generation Xbox console ecosystem. Presentation documents from May 2022 demonstrated how users could spend their in-game currency with the integration of a crypto wallet, which might be developed by Microsoft or supported by MetaMask or Coinbase Wallet.
- Two Coinone Sentences: Two former employees of South Korean crypto exchange Coinone have been sentenced for accepting bribes. Former head of crypto listing Jeon was handed a four-year prison sentence and was ordered to pay back 1.93 billion Korean won whilst another employee Kim received a 42-month prison sentence and a penalty of 883 million won. The pair allegedly took bribes for listing specific cryptocurrencies on the platform.
- Binance Sells Russian Arm: Binance is selling its Russian business to the newly-launched exchange CommEX, in response to the Russia-Ukraine conflict. Binance clarified will not receive ongoing revenue from the sale and will not retain the option to repurchase shares in the business. Assets belonging to Russian users will be migrated later this year.
- From Crypto to Stocks: U.S. cryptocurrency exchange Kraken is considering offering stocks and ETFs. In somewhat of a reversal, the move will make it the first crypto exchange to expand into traditional financial assets. Expected to launch by 2024, the service will be supported by Kraken Securities, which has secured regulatory permits in the U.K. and is awaiting approval in the U.S.
- MoneyGram Wallet: MoneyGram is launching a non-custodial wallet on the Stellar blockchain, allowing users to easily exchange fiat with USDC. The wallet aims to facilitate cross-border payments and reduce processing times and high fees. It will adhere to "know-your-customer" requirements and will only be compatible with other MoneyGram wallets. “We’re turning MoneyGram into a global ATM concept using blockchain," said MoneyGram’s CEO, Alex Holmes.
