Arslan Butt
Chairman of the US Securities and Exchange Commission (SEC) Gary Gensler spoke about crypto regulation in a speech that could make the space more attractive to institutional investors.
Gensler spoke on the need for tougher regulations and to “protect” investors but, in his view, stricter rules will be crucial for wider adoption.
He said: “Detroit would not have taken off without some traffic lights and cops on the beat. This field will not take off unless you have some trust.”
Gary Gensler Remarks on Crypto Regulation
During his prepared remarks at the SEC Speaks event, Gensler stated that regulatory bodies must collaborate to establish clear laws surrounding cryptocurrency and investments to protect investors. Gensler stated that cryptocurrencies should be classified as securities and encouraged cryptocurrency businesses to register with the organization.
At an event sponsored by the Practising Law Institute on September 8, he added that the crypto industry does not require new regulations and that the SEC’s current standards still apply. He spoke about crypto intermediaries, stablecoins, and other sensitive cryptocurrency market topics.
Gensler explained how the SEC’s current rules govern the cryptocurrency industry, whether it’s issuing tokens or providing other services like lending. He believes that most cryptocurrencies or tokens are investment contracts. Gensler specifically mentioned stablecoins’ ability to function as securities, depending on their peg.
He also stated unequivocally that there was no longer any need to develop specific regulations for the sector and recently claimed that the securities rules do not conflict with anything related to cryptocurrency markets.
Gensler stated that he would support Congress giving the SEC’s sister body more authority to regulate cryptocurrencies such as Bitcoin. He further said the Commodity Futures Trading Commission is eager to work with Congress to improve its ability to monitor and control “non-security tokens and their intermediaries.”
Concerns About Bankruptcy
In his speech, Gensler briefly mentioned loan companies, stating that they are subject to his agency’s regulation if they provide securities. He emphasized the risks to investors, pointing out that some had declared bankruptcy and restricted consumer access to their money. According to him, customers’ funds have been frozen by firms that have not declared bankruptcy.
“Our security rules contain fundamental safeguards against it. If you invest in any service providers or platforms, you will not receive that basic insurance against fraud, manipulation, and front-running.”
Gensler used the SEC’s agreement with cryptocurrency lender BlockFi as an example of how businesses can register with the organization. However, he avoided discussing any other specific firms.
Stablecoins May Qualify as Securities
Gensler’s main point was that there is no need for additional regulations or laws because existing rules govern crypto activities. In his speech, Gensler mentioned stablecoins as another category where investor rights are required.
According to Gensler, stablecoins may qualify as securities – depending on how their peg is maintained, whether they pay interest, and how they are traded. He also stated that this is by no means a comprehensive list.
The key takeaway is that when determining whether a product is a crypto security token, a crypto non-security token, or another instrument, it is critical to consider its facts and conditions rather than its title.
Related:
- Note to SEC on Digital Asset Regulation: Crypto Exchanges Are Not Like Stock Exchanges
- U.S. SEC is Going to Create a New Office For Handling Crypto Filings
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This article was written for Business 2 Community by Arslan Butt.
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