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Photo illustration: Shoshana Gordon/Axios. Photo: Andrew Harrer/Bloomberg via Getty Images

What a week for cryptocurrencies in Washington. SEC chairman Gary Gensler spent Tuesday in the spotlight when he said at the Aspen Security Forum that not only does he believe virtually all initial coin offerings are securities, but that token exchanges are very likely facilitating trading of unregistered securities.

What they're saying: "While each token's legal status depends on its own facts and circumstances, the probability is quite remote that, with 50 or 100 tokens, any given platform has zero securities," said Gensler.

  • His predecessor, Jay Clayton, infamously declared in 2018 that "every ICO I've seen is a security," a view Gensler says he concurs with.

Why it matters: Gensler's arrival at the SEC has been viewed positively by some in the crypto industry given his interest and expertise (he previously taught a course on the subject at MIT). Gensler understands crypto and could finally deliver the thoughtful regulations many have been waiting for.

  • Yes, but: He's equally committed to upholding American securities laws, even if that means bad news for some digital tokens and industry players not in compliance.

Between the lines: While Gensler is less hard-line than Clayton on existing laws being all that are needed to regulate this new world of digital tokens, he's quite firm in his view that much of the investment in crypto is driven by speculation and hope of profits — and should be regulated as such.

  • "Standing astride [of the law] isn't a sustainable place to be," he warned.

Details: Gensler noted that while existing laws are quite clear when it comes to figuring out if something is a security, his agency may need new laws from Congress to help better regulate new crypto trading platforms.

  • He also said that some of them "are trying to play arbitrage between the jurisdictions" of various countries, making it all the more important for his agency to have the right tools.
  • The emergence of the "decentralized finance" protocols that let participants execute various transactions directly with each other instead of using intermediaries are creating new unregulated ways for people to engage in activities that would otherwise fall under strict rules.
  • Gensler also signaled his agency could move to finally approve some form of a Bitcoin exchange-traded fund — a vehicle many have tried to get approval for, unsuccessfully so far given regulators’ concerns over market manipulation risks.
  • Also on his watch list: stablecoins, which he noted can be used to get around regulatory oversight.

The bottom line: Expect to hear a lot more about cryptocurrencies from the SEC.

Go deeper

SEC debunks conspiracy theories about meme stock mania

Photo: Alessia Pierdomenico/Bloomberg via Getty Images

The SEC issued its long-awaited report on the meme stock mania, which downplayed the narrative that a "short squeeze" was the primary driver behind GameStop's historic stock moves — and shot down conspiracy theories about the event.

Why it matters: The postmortem was highly anticipated, largely because of what it could hint about what the regulator thinks should be done in wake of the saga. But the report stopped short of specific policy recommendations.

Updated 8 mins ago - Science

Nor'easter slams East Coast with flooding rain and powerful winds

A residential area in Middlesex County as floodwater from the nor'easter covers streets in New Jersey on Tuesday. Photo: Tayfun Coskun/Anadolu Agency via Getty Images

A monster storm was slamming the Northeast with record rainfall and powerful winds over Tuesday night — causing flash flooding that resulted in people having to be rescued in New Jersey and New York roads to close.

Threat level: All of southern New England westward to New York City and northern New Jersey was under the threat of flash flooding and coastal flooding from the nor'easter through Tuesday night into early Wednesday, per the National Weather Service.

13 mins ago - World

Blinken speaks with Sudan prime minister after his release

Sudan's Prime Minister Abdallah Hamdok. Photo: Ebrahim Hamid/AFP via Getty Images

Secretary of State Tony Blinken spoke on the phone on Tuesday evening with Sudan’s Prime Minister Abdalla Hamdok after the military released him from custody.

Why it matters: Hamdok’s release was a result of pressure on Sudan’s military leader General Abdul Fattah al-Burhan from the U.S. and other countries but also from the different political parties in Sudan and massive protests in the streets.

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