On July 21, 2021, U.S. Securities and Exchange Commission Chairman Gary Gensler spoke at an American Bae Association event.  His main topic was security-based swaps.  But at the end of his prepared remarks, the Chairman went out of his way to comment about the intersection of security-based swaps and financial technology, including cryptoassets.

With respect to initiatives to offer crypto tokens or other products that are priced off of the value of securities and operate like derivatives, Gensler said:

Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These platforms — whether in the decentralized or centralized finance space — are implicated by the securities laws and must work within our securities regime.

If these products are security-based swaps . . . then, any offer or sale to retail participants must be registered under the Securities Act of 1933 and effected on a national securities exchange.

Many observers took this to be a reference to stablecoins, especially in light of the greater scrutiny they have come under recently.  Tether, which issues the world’s largest stablecoin (USDT) has disclosed that its reserves included investments in commercial paper and corporate bonds.

To make clear that the SEC would be watching this space closely, the Chairman said that “we’ve brought some cases involving retail offerings of security-based swaps; unfortunately, there may be more.”  This is likely a reference to the SECs’ settlement that we reported on last summer with Abra (a crypto investment app maker), which was charged with offering and selling security-based swaps to retail investors without registration and failing to transact those swaps on a registered national exchange.  


David Zaslowsky has a degree in computer science and, before going to Yale Law School, was a computer programmer. His practice focuses on international litigation and arbitration. He has been involved in cases in trial and appellate courts across the United States and before arbitral institutions around the world. Many of David’s cases, including some patent cases, have related to technology. David has been included in Chambers for his expertise in international arbitration. He is the editor of the firm's blockchain blog.