SEC Chair Gensler says investors don't get 'needed disclosures' for crypto assets: CNBC Crypto World

Today, Bitcoin and ether hold their ground after yesterday’s losses. SEC chair Gary Gensler joins CNBC Squawk Box to talk about the Wells notice the agency sent to Robin Hood. And Dave Weisberger of Coin Roots discusses how the regulator seems to be stepping up its enforcement of the crypto industry. Welcome to CNBC’s crypto world. I’m Brandon Gomez. Cryptocurrencies were mixed this morning after spending Monday in the red. By noon Eastern, Bitcoin stayed pretty much flat, trading higher by only 110th of 1%. Ether was in the red, but only by a little more than half a percent. XRP, though down further, falling about 3 1/2 percent. OK, let’s talk about the top stories. Binance CEO Richard Tang is calling for the release of a Binance executive currently held in Nigeria. In a blog post this morning, Tang said the detainment of Tigran Gamberian has set a dangerous new precedent for all companies worldwide, and that Gamberian didn’t go to Nigeria as a decision maker or negotiator. Instead, Tang says the executive went as a functional expert in financial crime. Gamberian was detained alongside another finance executive, Nadeem Andrawala, who fled Nigeria earlier this year. Authorities in the country accused finance of non payment of value added and company income taxes, failure to submit tax returns and aiding tax evasions by customers. Next, Australia is reportedly stepping up efforts to crack down on evasion of capital gains taxes for Crypto. Reuters reports the Australian Tax Office requested information regarding 1.2 million accounts to crack down on users avoiding taxes. The Ato reportedly said the information will help the agency find traders who failed to report crypto assets or when they sold it. On Monday, the Australian Financial Review reported that as part of a surveillance effort announced in April, the tax agency said it would require crypto exchanges to provide information including names, birthdays and transaction details. Last SEC chair Gary Gensler joined CNBC Squawk Box this morning, where he responded to a question about the agency’s Wells notice to Robin Hood. On Monday, the trading app disclosed that the agency sent the letter over the weekend, warning the SEC could soon pursue enforcement actions over Robin Hood’s crypto operations. Gensler was asked what investors who use Robin Hood should know about the agency’s recent enforcement actions, including that Wells notice. I can’t speak to anyone company, but stepping back from it the field of crypto assets without prejudging any one of them, Many of those tokens are securities under the law of the land as interpreted by the US Supreme Court. So we follow that law and you, the investors are not getting the required or needed disclosures about those assets. At the same time, research firm KBW said in the report that Robin Hood is more likely to win in a case against the SEC than its competitors. The report, called the Wells Notice quote surprising given Robin Hoods historically very conservative approach to crypto asset listing, with an offering of only 15 crypto assets on its US platform. That’s compared to some others, which KBW notes have more than 200. All right, sticking with Robin Hood for our main story. We spoke with Dave Weisberger, Executive Chairman of Coin Roots, about that Wells notice to Robin Hood and what the SE CS growing list of enforcement actions will mean for the industry at large. So, Dave, we have this blog post from Robin Hood come out saying it’s received a Wells notice for its crypto operations. I think a lot of people were caught off guard by this. KBW even said in a report this morning that the move was surprising. What’s your reaction to this development? Is it actually surprising to you? Well, I wish I could say I was surprised, but it’s a continuation of an SEC pogrom basically against the crypto industry effectively. People talk about the word regulation, but it’s not really regulation that they’re after. They’re really after prohibition. They’re really doing everything they can. If you think about it, if you’re a average investor, you’re not accredited. They’re going after Coinbase, they’re going after Kraken, now they’re going after Robin Hood. They’re basically saying you shouldn’t be allowed to own what’s been one of the best performing asset classes you know, period. Moreover, the SEC is is not supposed to be a merit based regulator. They’re supposed to make sure there’s good disclosures. And there’s actually more information about most crypto projects, certainly the ones that that Robin Hood lists, than there are about quite a few other assets. So it’s just more of the same. I wish I could say it was something else, but it’s really, you know, a war. And, you know, one can speculate as to why, but it seems fairly clear what’s going on here. And so on that point, what do you think the SE CS thinking is here? They’ve gone after a lot of crypto native businesses like Coinbase and Kraken, but this is perhaps a little different given Robin Hood’s limited role in crypto compared to its stocks business. What’s the motivation in your view? There’s only one motivation. I wish I could. I can’t think of anything else that maybe there’s something else. Maybe smarter people than me could figure something else out. It’s to essentially try to push crypto out of the United States, push digital assets. Look, Mackenzie, I like everyone when I talk to people in the crypto industry and at Coin Routes, we talked to just about everybody at at a senior level. We all believe that the future of capital markets is going to be digital and we think that crypto is incubating many of the market structure ideas, many of the technologies that it can be essential to compete in capital markets in the next 25 years. And the SEC is trying to push it offshore. The only one possible reason for that is to protect incumbents, protect people who are effectively the best damn buggy whip manufacturer to use Danny Devito’s old line. But the people who are basically defending the analog financial system that relies on paper tickets sitting in a vault underneath 55 Water St. that’s the only thing we can think of. You know, Elizabeth Warren is literally is the leader of the anti crypto army and effectively while she likes to yell at the big banks, she’s been protecting them. She’s even let the big banks help write rules that she’s proposed. So it really is that simple. I I wish it wasn’t because crypto should not be by, should be bipartisan. It should not be a partisan issue, but it has become one. The SEC chair Gary Gensler came on CNBC today and and talked about the agency strategy in crypto, Really doubled down on the idea that the crypto industry is rife with non compliance and that the agency really has to be the cop on the beat to crack down. Where do you think the industry stands in terms of cutting off bad actors or this idea that there is widespread violations of securities law? Well, there’s two points here. First, I actually think it would be a great thing if the SEC was the cop on the beat if they actually did focus on enforcement, on cases where there was provable harm. I think that the industry is cheering for the SEC in the Doquan case, for example, and maybe not cheering because they’re gonna try to use it as a precedent to go after other people. But the fact that that Doquan was a bad actor, I don’t think there’s much argument about that in the industry. And people think he should be punished. The problem is, is what he’s actually doing. And and and it’s been the only time I’ve ever agreed with John Reed Stark, who’s testifying today in front of one of the congressional committees used to work at the SEC. He admitted to me I was right, which is that the SEC back decades ago when he was there, used to focus on cases with it when there was harm, where investors lost money. But this SEC doesn’t care whether there’s harm. They’re going after more jurisdiction and more technical violations. So if you technically say you’re violating securities laws, well, that’s true. But what he’s not telling you, Mackenzie, is that there is no path to comply with security rule for digital asset issuers or markets. There literally is none. Now if you look at Robin Hood, it’s really important to understand Robin Hood is operating their crypto business out of an affiliated non broker dealer. Well why are they doing that? That’s because FINRA and the SEC have not approved any broker dealers offering crypto as non securities. As a result, you know programmers, I tweeted this, you know a couple days ago, it’s we call this a deadly embrace. You’re literally, it is no way through. If it’s a security, then there’s no path for making it work. And if it’s not a security, they’re not allowing them to do it. So effectively they’re bogging it down and they’re they’re standing on on ceremony basically. How are you thinking about the current regulatory regime for your business? Does the SE CS view of the industry play into how you make decisions at your company? Absolutely. Well, there’s two things. We stayed a software company five years ago. Our plan was to register with Finro and become an introducing broker trading non securities or if if any digital assets became securities to trade them. The reality is we couldn’t do it because there’s no path to doing it. So we’re a pure software provider which limits our profit potential for sure. You know, we stay out of the client flow of funds. We don’t do any of that. We offer algorithms, we offer training access. We offer professional investors the ability to do it. But all of our clients are clients of other exchanges. But almost all of our businesses moved overseas and in fact we’re moving overseas as well. We’re opening offices offshore. In fact you know we’re opening up affiliates, you know in the UAE because they have a actual regulatory framework there. So it’s definitely impacted us. Every single CEOI talked to, every other company that we talked to. They all are facing the same pressure. It’s extremely rare to find a crypto company that isn’t either moving offshore, opening up offshore or or considering it. And that’s really a shame because America, our economy, has benefited immensely from having the best capital markets in the world over the last 30 years. And if all the new innovation moves offshore, we’re going to lose that. And that would be very sad. As a patriotic American, I really hope that that does not come to pass. All right, That’s all we have for Crypto World today. We’ll be back here again tomorrow. See you then.