The US Securities and Exchange Commission (SEC) will regulate cryptocurrencies as much as possible using its current authority, SEC Chairman Gary Gansler said on Tuesday as he called on Congress to give the authority more resources and expand its power to oversee The domain.
Gensler said this type of asset is saturated with “scams, conspiracies and abuse” and thus hinted that the SEC would become more active in trading crypto and loan platforms, as well as so.called stablecoins.
“We just don’t have enough protection for investors in crypto. Honestly, at this time, it’s more like the Wild West,” Gensler said in a pre.written post on Aspen’s safety forum. “We have used and will continue to use our authority as much as they allow us to.“
U.S. financial regulators have struggled to embrace the growing world of cryptocurrencies and related financial technologies. Unlike securities and derivatives markets, there is no single regulatory agency that oversees cryptocurrencies or traders. Scam cases.
Gansler said large parts of the sector operate outside the regulatory framework that seeks to protect investors and consumers, reduce crime, promote financial stability and protect national security.
Legislators also think the crypto market needs to be more closely monitored
“If this innovation has any chance of surviving into the end of the current decade and into the 1930s, it can not happen outside of public policy,” said Gensler, a veteran Democratic regulator who taught a course on cryptocurrencies at MIT.
Gensler’s remarks came as there was growing recognition by some lawmakers and officials in the Biden administration that the crypto market had become large enough and important enough to be monitored more.
In May, Sen. Elizabeth Warren (a Democrat from Massachusetts) wrote to Gensler asking about the council’s ability to protect investors. This week, House Rep. Don Beyer (Democrat from Virginia) introduced a bill that would have led to comprehensive legislation on digital assets.
“We’re going to see more enforcement activity, I think it’s inevitable,” said Stephen Pali, a partner at law firm Anderson Kill whose clients also include crypto companies. “My thinking is that people who understand this market and participate in it may be more successful.“
Gensler told House lawmakers that investor protection rules should be applied to crypto exchanges, similar to the way they include securities and derivatives. Regulatory exchanges are required by law to have rules that prevent fraud and promote fair trade.
“While this asset field continues to grow, it is vital that regulators work with industry to reach sensible positions so that all the benefits of technology are realized,” said Michelle Bond, CEO of the Digital Asset Markets Association.
Speaking Tuesday, Gensler highlighted a variety of areas in which the SEC could expand its oversight.
Decentralized trade is gaining momentum – and so are the acts of fraud
One of them is decentralized trading, or DeFi, computer applications used to lend, lend, earn interest and trade assets and derivatives. Some DeFi developers say that technology does not have to deal with federal oversight because automated software is not controlled by individuals or companies and does not hold merchant assets. The services are often used by people seeking to borrow against holdings of their cryptocurrencies in order to make larger bets.
Investors have poured tens of billions of dollars into the DeFi sector over the past 12 months, often in an attempt to get returns on their crypto assets that are far greater than they could achieve through dollar.based interest rates. The assets deposited as collateral in DeFi projects increased to $ 85 billion compared to about $ 3 billion a year ago, according to data company DeBank.
DeFi supporters say they are building an innovative alternative to traditional trading, but this space is also saturated with fraudulent acts. From January to April, DeFi scams cost investors $ 83.4 million, according to CipherTrace, an analyst firm.
“In the world of cryptocurrency financing there are now platforms where people can trade currencies and other places where people can borrow coins,” Gensler said. He said he believes these platforms could be subject to securities laws and may also be subject to commodity laws and banking rules.
Gensler said that stable currencies – stablecoins – digital assets linked to the value of national currencies – may also meet the definition of securities or investment firms, which would also put them in the SEC’s jurisdiction.
Traders typically use stablecoins to exchange one crypto asset for another, Gensler said, noting that in July nearly three.quarters of crypto.platform trading happened between stablecoin and some other currency.
“The use of stablecoins on these platforms may make it easier for those seeking to circumvent a variety of public policy objectives related to our traditional financial and banking system: anti.money laundering tools, tax compliance, sanctions and the like,” Gensler said.
There are $ 113 billion in stablecoins on the market, according to Block, a crypto research and news company. Almost half of them are in tether, a stabelcoin currency linked to the US dollar. In February, the companies behind tether and its affiliated bitcoin exchange agreed to pay $ 18.5 million to complete an investigation by the New York Attorney General’s Office into misrepresentation of the tether.based reserves. The companies did not admit or deny that they presented the reserves incorrectly.
“A lot of currencies can be unlisted securities”
On Tuesday, Gensler hinted at the possibility of further enforcement action against crypto assets and trading platforms that the SEC defines as securities. To determine this, regulators examine whether the investments were made as an “initiative of many people” and whether the expected profits depend on the efforts of other people.
“People are buying these coins in anticipation of profits, and there is a small group of entrepreneurs and tech people who are cultivating the projects,” Gensler said. “I believe we currently have a crypto market where a lot of currencies may constitute unlisted securities.“
Because they are not listed in the SEC as brokers, US crypto trading platforms generally allow trading only in assets they believe do not constitute securities. Coinbase, a crypto exchange issued earlier this year, said in a report to the SEC that it could be penalized if regulators reach a conclusion That its platform is used for trading in unlisted securities.
Gensler said it is unlikely that out of more than 50 coins that can be traded on a typical crypto platform, none constitute a security.
“I encourage these platforms to come and talk to us. Sign up. The chances of you having securities on your platforms are pretty good,” Gensler said.
Alexander Osipovich participated in the preparation of the article.