SEC Chair Gensler Calls For More Investor Protection In Crypto Market
Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), has suggested that more investor protection in crypto markets is needed.
According to Gensler, crypto “is rife with fraud, scams, and abuse in certain applications.” He continued: “In many cases, investors aren’t able to get rigorous, balanced, and complete information on tokens or trading and lending platforms.”
Gensler concerned about the crypto markets
Gensler raised concerns about the cryptocurrency markets at an Investor Advisory Committee meeting last week.
The Investor Advisory Committee, established by Section 911 of the Dodd-Frank Act, advises the SEC on regulatory priorities, including “initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace.”
Gensler started by acknowledging that “Satoshi Nakamoto’s ‘Bitcoin Whitepaper’ and the crypto markets that followed have been catalysts for change.” In August, Gensler said Bitcoin’s pseudonymous creator’s “innovation is real” and “it has been and could continue to be a catalyst for change in the fields of finance and money.”
Gensler told the Investor Advisory Committee:
“This is an asset class that belongs inside public policy frameworks of looking after investors, guarding against illicit activity, and protecting our financial stability.
Unfortunately, this asset class is rife with fraud, scams, and abuse in certain applications … In many cases, investors aren’t able to get rigorous, balanced, and complete information on tokens or trading and lending platforms.
Right now, we just don’t have enough investor protection in crypto. The American public is buying, selling, and lending crypto on trading, lending, and decentralized finance (defi) platforms, where there are significant gaps in investor protection.
This leaves markets open to manipulation. This leaves investors vulnerable. If we don’t address these issues, I worry a lot of people will be hurt.”
Gensler explained that many crypto “tokens are offered and sold as securities.” To the issue whether a token is considered as a security, he said:
“There’s actually a lot of clarity on that front. In the 1930s, Congress established the definition of a security, which included about 20 items, like stock, bonds, and notes.”
The SEC chairman continued:
“One of the items is an investment contract,” noting that many tokens in the crypto markets “may be unregistered securities, without required disclosures or market oversight.”
Gensler said:
“It’s best not to wait for a big spill on aisle three — the crypto aisle, with all its tokens, trading and lending going on to clean up the investor protection issues.”
Gensler concluded his speech by stating that crypto platform operators and token issuers should “come in and talk to the staff at the SEC.”
And added:
“Financial innovations throughout history don’t long thrive outside of our public policy frameworks. If this field is going to continue, or reach any of its potential to be a catalyst for change, we’d better bring it into public policy frameworks.”
