Gary Gensler, the head of the United States Securities and Exchange Commission (SEC), has urged for greater investor protection in cryptocurrency markets. In fact, “In certain uses, this asset class is riddled with fraud, frauds, and misuse”, he stated. “In many situations, investors are unable to obtain thorough, impartial, and comprehensive information about tokens, trading platforms, or lending platforms”.
Gary Gensler emphasizes that more investor protection is pivotal
SEC Chairman Gary Gensler raised concern about the cryptocurrency markets at a meeting of the Investor Advisory Committee last week.
The Investor Advisory Committee, established under Section 911 of the Dodd-Frank Act, provides guidance to the SEC on regulatory goals. Such as “initiatives to defend investor interests and increase investor confidence and the integrity of the securities markets”.
“The Bitcoin Whitepaper by Satoshi Nakamoto and the crypto markets that followed have been catalysts for change”, he stated. Furthermore, according to Gensler, Bitcoin’s “innovation is genuine”. As well, it “has been and could continue to be a catalyst for change in the disciplines of finance and money”.
“This is an asset class that falls within public policy frameworks of protecting investors, combating criminal behaviour. As well as maintaining our financial stability”, Gensler told the Investor Advisory Committee. Noting the total market value of all cryptocurrencies. He elaborated:
“Unfortunately, in some applications, this asset class plagued by fraud, scams, and misuse… Investors are frequently unable to obtain thorough, impartial, and comprehensive information about tokens, trading platforms, or loan platforms.”
Markets become vulnerable to manipulation
“Right now, there isn’t adequate investor protection in bitcoin”, the SEC chairman explained. “The general public in the United States is buying, selling, and lending cryptocurrency via trading, lending, and decentralised finance (defi) platforms, where investor safety is lacking”. He went on to emphasize:
“Markets become vulnerable to manipulation as a result of this. Investors are exposed as a result. I have concerns that many individuals may be harmed if these concerns are not addressed.”
Many crypto “tokens” offered and sold as securities, according to Gensler. “There’s really a lot of clarity on that front”, he remarked when asked if a token considered a security. Congress created the concept of a security in the 1930s. Which comprised around 20 assets such as stock, bonds, and notes”.
“Come in and talk to the SEC staff”
“One of the elements is an investment contract”, the SEC chairman said. Additionally, he stressed that many tokens in the crypto exchanges “may be unregistered securities, lacking needed disclosures or market monitoring”. Gensler stated:
“It’s preferable not to wait for a major spill on aisle three, the crypto aisle, with all of its tokens, trading, and loans — to clear up the investor protection concerns.”
In conclusion, the SEC chair closed his remarks by urging crypto platform operators and token issuers to “come in and talk to the SEC staff”.
“Financial innovations haven’t thrived outside of our public policy frameworks for very long,” he continued. We need to include this sector in public policy frameworks. If it is to persist or achieve any of its promise as a catalyst for change”.