The Chairman of the SEC (Securities and Exchange Commission) Gary Gensler told US lawmakers that he wishes to work with Congress and other regulatory agencies to ‘filling in the gaps’ in the crypto markets when it comes to investor protection. This is an indication that tighter regulations may soon be developed by the US SEC for the crypto sector. The remarks were made by the regulatory head recently at the US House of Representatives is his testimony before the General Government of the Appropriations Committee and the Subcommittee on Financial Services. Speaking in the lower chamber of the US parliament, he said that cryptocurrencies were a highly speculative and volatile asset class.
He also added that a number of tokens are simply investment contracts that fall under the securities law of the country. Gensler said that the SEC has consistently been informing all market participants that compliance with federal securities law is essential for those who engage in securities transactions or raise capital via initial coin offerings. He also stated that asset managers making investments in these assets would also be regulated by the same laws and that there were numerous gaps and challenges for investor protection within these markets.
As no crypto exchange has registered with the SEC as an exchange as yet, the Chairman claimed that the regulation offer significantly less investor protection, as opposed to traditional securities markets. He asserted that it simultaneously offered greater opportunities for manipulation and fraud, which had prompted the SEC to prioritize cases involving fraud or harming investors that are related to tokens. He said that there was another problem associated with the trading of these coins on unregulated crypto exchanges. Gensler said that even though the trading volume for the global crypto market was between $130 billion and $330 billion in recent weeks, the figures were not reported to or audited by regulatory authorities, as the exchanges are not registered.
He said that this was just one of the various gaps in the crypto market. Likewise, the decentralized finance (DeFi) space has also ended up in the regulatory crosshairs of the SEC. Gensler said that such platforms boast a number of challenges for investors, as well as the SEC that wants to protect them. Sworn into office last year, the testimony indicates that Gensler wants to impose more stringent regulations on the crypto space in cooperation with other lawmakers and regulators.
This is contrary to what the crypto space had been hoping from the SEC leader, who had allegedly been ‘pro-crypto’. Earlier this month, the Chairman had said that Bitcoin was a volatile and speculative store of value, but that it wasn’t under the authority of the SEC, as it is not considered a security and classified as a commodity. However, he did say that a number of crypto tokens were securities indeed, and he refused to refer to them as cryptocurrencies. The SEC is currently in an ongoing battle with blockchain company Ripple over its XRP token, which it regards as an unregistered security.