US Securities and Exchange Commission (SEC) chairman Gary Gensler has described cryptocurrency as "rife with fraud, scams, and abuse in certain applications" and called for more government regulation to protect investors in the assets.
Speaking at the Aspen Security Forum, an annual three-day conference in Aspen, Colorado, Gensler accepted that cryptocurrency "has been and could continue to be a catalyst for change in the fields of finance and money," but warned it remains "highly speculative" and used as a medium of exchange mostly in situations when users wish to launder money, evade sanctions and/or tax, or enable extortion.
He also worried that cryptocurrencies are treated as investments, but lack investor protections.
"Right now, we just don't have enough investor protection in crypto. Frankly, at this time, it's more like the Wild West," said Gensler, later adding:
Make no mistake: It doesn't matter whether it's a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These products are subject to the securities laws and must work within our securities regime.
Gensler then called on Congressional authorities to prevent transactions, products and platforms "falling through the cracks". He also wants more resources to protect investors. The chairman said legislators and regulators should prioritise crypto trading, lending and the likes of peer-to-peer finance platform DeFi, which circumvents traditional banks in its trading mechanism.
Gensler clarified that he was speaking personally, and his views did not necessarily reflect those of the Commission or SEC staff. However, many have wondered what direction Gensler – who assumed the lead at the SEC only this past April – would take with cryptocurrency under the Biden Administration, and the Aspen Security Forum is not the only mode he's used recently to express his views.
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"To be clear I think the SEC should be technology neutral, but one thing we're not neutral on is investor protection," said Gensler in a tweeted video the same day as his talk.
If crypto is going to be widely adopted, it needs some rules of the road & a cop on the beat to enforce them.— Gary Gensler (@GaryGensler) August 3, 2021
To be clear, I am technology-neutral.
What I'm not neutral about: Investor protection. pic.twitter.com/e6GsSAyXhB
The US Treasury has also recently advocated further regulating cryptocurrencies, and in May 2021 required American businesses receiving crypto payments of over US$10,000 to report the transactions to the Internal Revenue Service. It was speculated at the time that regulating the technology would fall to the SEC. ®