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• SEC Chair’s comments came after a Treasury Department-led panel published a report on stablecoins, asking Congress to set up a framework
• Gensler, who tagged crypto as “wild west,” asked the securities trade group to ensure consumer protections
SEC Chair Gary Gensler said the regulators would be “very active” in bringing the cryptocurrency sector under investor protection framework as the Biden administration increases scrutiny of digital tokens.
Gensler’s remarks followed a highly anticipated report from the President’s Working Group on Financial Market asking Congress to create regulations for cryptocurrencies pegged to government-backed assets like the U.S. Dollar and gold, also known as stablecoins.
Not-so-‘stable’ coins
Crypto firms (like Tether Ltd. and Circle Internet Financial Inc.) issue stablecoins. Stablecoins can trade quickly online like bitcoin with the stability of national currencies.
“If well-designed and appropriately regulated, stablecoins could support faster, more efficient, and more inclusive payments options,” the report said.
However, regulations around stablecoins are “urgently needed,” and Congress should enact laws that will allow only banks to issue the coins.
“Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy,” the report warned.
Growing concern around digital tokens
Gensler compared cryptocurrency technology, which has been around for about 13 years, to a teenager, in the Securities Industry and Financial Markets Association conference.
He said he believes the technology won’t reach “adulthood” if it isn’t brought within broader regulatory oversight for issues such as anti-money laundering and tax compliance.
“There’s a lot of hype. There’s a lot of investors, on the one hand, reaching for yield, who are hoping to have a little bit better future, but these platforms right now, generally, have not come into either the [Commodity Futures Trading Commission] or the SEC to be within an investor protection framework,” he said.
Gensler said many cryptocurrencies have died, and many existing ones are raising money from the public, posing risks such as fraud and manipulation, and earlier tagged the crypto industry as the “wild west.”
Although stablecoins account for about 5% of the total crypto market value, he said the tokens represent 75% or 80% of the crypto transactions volume.
Gensler,has been asking Congress to give SEC more authority to deal with fraud and misconduct for months. He suggested that the securities trade group members should work with lawyers and accountants to ensure consumer protections, rather than simply seeking approval from banks and market regulators.
Picture Credit: Bitcoin News