(AP Photo/Jacquelyn Martin)
On Tuesday at the Aspen Security Forum Conference, Securities and Exchange Commission Chairman Gary Gensler said that the financial regulator needs more authority in order to fully regulate the crypto world and protect the investors, especially when it comes to the world of lending and decentralized finance (DeFi) platforms.
“Right now, in this digital scarce speculative asset, bitcoin and others, we just don’t have enough investment protection and frankly at this time, it’s more like the wild west.” said Gensler. For instance, the world’s largest cryptocurrency exchange, Binance, lists over 900 tokens.
Gensler, who was sworn in as the SEC chairman earlier this year, and was a former adjunct professor at MIT who taught classes about financial technologies and blockchain, has asked for the help of congress to regulate crypto.
Because of this background he is seen by many in the industry as a friend, or if nothing else a neutral party when it comes to crypto. However, in today’s speech he made it clear that while he can be neutral from a technology perspective, he is anything but when it comes to policy.
And when he surveys the crypto landscape, he still sees the deck stacked against ordinary investors. In particular he worries about the multitude of assets floating around on decentralized finance (DeFi) platforms, crypto derivatives, and even stablecoins that he believes fall under the SEC’s jurisdiction because they are securities regardless of nomenclature.
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This can be harmful to investors because it could create information asymmetries between issuer and purchaser that leaves the latter exposed. To date, the only crypto assets that are widely accepted as commodities are bitcoin and ether.
“Certain rules related to crypto assets are well-settled. The test to determine whether a crypto asset is a security is clear. There are some gaps in this space though. I do think we need additional congressional authorities to prevent transactions, products, and platforms falling between regulatory cracks” says Gensler.
Still, Gensler believes that the technology derived from bitcoin, such as Satoshi Nakamoto’s distributed ledger technology, is real and will become a catalyst for a change in the money and financial fields. He also believes that crypto assets still do not broadly fulfill the three requirements of fiat monies: store of value, unit of account and medium of exchange.
“No single crypto asset, though, broadly fulfills the functions of money. Bitcoin has some of it but not broadly fulfilling all three.” adds Gensler
The focus of the legislative powers would be most beneficial if it focused on crypto trading, lending and DeFi platforms according to Gensler.
Gensler did not make any comments towards the approval of a bitcoin ETF, a sector which his predecessor Jay Clayton is currently involved in.
“We have taken and will take our authorities as far as they can go,” says Gensler.
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Author: Anthony Tellez, Contributor