The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has called for more investor protection in crypto markets. “This asset class is rife with fraud, scams, and abuse in certain applications,” he said. “In many cases, investors aren’t able to get rigorous, balanced, and complete information on tokens or trading and lending platforms.”
Gary Gensler wants more investor protection in crypto markets
SEC Chairman Gary Gensler raised concerns about the cryptocurrency markets at an Investor Advisory Board 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.”
During his speech, Gensler raised some concerns about the crypto markets.
He began 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.”
Citing the market capitalization of all cryptocurrencies, Gensler told the Investor Advisory Board: “This is an asset class that belongs to the public policy frameworks of protecting investors, guarding against illicit activities and to protect our financial stability ”. He nods:
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.
“At the moment, we just don’t have enough investor protection in crypto,” said the SEC boss. “The American public buys, sells and lends cryptos on trading, lending and decentralized finance (challenge) platforms, where there are significant gaps in investor protection.” He underlined:
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 went on to explain that many “crypto tokens are offered and sold as securities.” Commenting on whether a token qualifies as a title, 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 elements, such as stocks, 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 is of the opinion:
It’s best not to wait for a big spill in aisle three – the crypto aisle, with all of its tokens, exchanges, and loans outstanding – to resolve investor protection issues.
The SEC chair concluded his speech by stating that crypto platform operators and token issuers should “come in and talk to the staff at the SEC.”
He added: “Financial innovations throughout history do not thrive for long outside of our public policy frameworks. If this area is to endure or reach any of its potentials to be a catalyst for change, we would do better to integrate it into public policy frameworks.
