- Securities and Exchange Commission Chair Gary Gensler appeared in front of the U.S. House Financial Services Committee on Tuesday to testify about how the agency is adapting its oversight and rules to keep up with technological advancements in various fields, including artificial intelligence and cryptocurrencies.
He noted that instead of saying that securities laws applied only to stocks and bonds, Congress “included a long list of 30-plus items in the definition of a security, including the term ‘investment contract.’” Gensler noted that while the current investment adviser custody rule already applies to crypto funds and securities, the SEC’s recent proposal to update it “would cover all crypto assets and enhance the protections that qualified custodians provide.”
To combat this, Gensler said the SEC put out a proposal to require firms to analyze conflicts of interest that may emerge when using predictive data analytics to interact with investors. “Firms would need to identify any such conflicts that result in an investor interaction that places the firm’s interests ahead of investors’ interests,” he said. “Firms then would need to eliminate or neutralize the effects of those conflicts.
He also said that while the SEC “has engaged in a wide-ranging regulatory agenda,” they have “overlooked the importance of public input – resulting in bipartisan and bicameral concerns.” “On one hand, we have seen bipartisan votes in Congress to provide clear rules of the road and real consumer protection,” he said. “On the other, we’ve seen your ad hoc, regulation-by-enforcement approach to digital assets on a losing streak in the courts.”