Gary Gensler, the current SEC chief recently gave an interview to Washington Post to talk about cryptocurrencies and regulations. He reiterated his earlier stance on the need for strict investor protection regulations and suggested he is here to clean the crypto market before it “spills.”
The security debate has also turned quite controversial given the ongoing Ripple lawsuit and the recent threat against Coinbase’s leading services. Gensler reflected on the issue but didn’t provide much clarity on what makes a crypto asset security while others as non-security but warned that exchanges and platforms dealing with crypto assets must be ready for enforcement.
“It’s highly likely that they have on these platforms securities investment contracts or notes or others that fit the definition of security. Those platforms should come in. They should figure out how to register, be it an investment investor protection remit. Now, not many have. And so I do really fear that we’ll keep bringing these enforcement cases. But there’s going to be a problem. There’s going to be a problem with lending platforms or trading platforms. And frankly, when that happens, I think a lot of people are going to get hurt.”
However, it is important to note that the SEC chief has maintained a similar stance since taking office, but hasn’t given any outline or plans on how the SEC is going to ensure investor protection without killing the budding crypto market.
Gensler’s record as an MIT professor who taught about blockchain and crypto assets gave many crypto enthusiasts hope that his appointment would make way for better regulations, especially after the controversial tenure of Jay Clayton the form SEC chief.
Gensler’s Regulatory Stance Could Harm Crypto Sector More Severely
During, Clayton’s tenure as SEC chief, the crypto market was relatively new with not much interest from institutional investors, and thus in the hindsight, the decision to reject all Bitcoin ETF proposals seems fair given the market size and demand. However, today when the crypto market is thriving with adoption from retail and institutional giants alike, Gensler’s decision could prove more disastrous for the crypto market.
Gensler has indicated that under the current definition of security, the majority of crypto assets qualify as a security. He also indicated that he doesn’t see crypto lasting long, which says a lot about the regulatory chief who has studied and advocated for the crypto assets in the past.
Gensler-led SEC is currently working towards regulating the defi market which many believe would kill one of the fastest-growing crypto markets and it seems they plan to go after stablecoin next, deeming it as security despite it being backed by US Dollar. Gensler even likened stablecoins to Poker-chips. He said,
“Stablecoins are acting almost like poker chips at the casino right now, so add to the Wild West analogy — we’ve got a lot of casinos here in the Wild West and the poker chips, these stablecoins, at the casino gaming tables. So I think there’s just a lot of warning signs and flashing lights that we might have a spill on aisle three, and I’d rather get ahead of it.”