The Chairman of the Securities and Exchange Commission (SEC) has called for the crypto space to work with regulators. The Financial Times reported that Chairman Gary Gensler had asked Congress to empower his agency so they will be better able to govern the market. It is still not clear yet which agency has oversight of the cryptocurrency industry, as regulators mainly classify bitcoin as more of a commodity than it is a security.
It is estimated that less than 10% of the world currently knows about crypto. But nevertheless, it is still a large enough number that has prompted regulators to start looking into ways of properly regulating these digital assets. It is no longer just retail investors who are trying to make some quick profit on highly volatile markets. Institutional investors have also thrown their hat in the ring, like in the case of Michael Saylor’s MicroStrategy.
Finance Is About Trust
Gensler believes that if the market is to grow, then it needs to embrace regulation. The SEC chairman explained that regulation would provide trust in the market, which is important if the market does not want to become irrelevant over time. “Finance is about trust, ultimately,” Gensler said. Gensler’s focus is mostly on trading platforms, given that this is where the majority (~95%) of activities in the crypto market are carried out.
Gensler had earlier suggested that crypto platforms register with the Securities and Exchange Commission (SEC). This was met with disdain from investors who do not want governmental control over cryptocurrencies. But Chairman Gray Gensler has again urged these platforms to register with regulations. “Talk to us, come in,” said Gensler.
“There are a lot of platforms that are in operation today that would do better engaging and instead there is a bit of begging for forgiveness, rather than asking for permission.”
There have been crackdowns going on in the crypto space on exchanges. Most prominent of these have been the crackdowns on Binance by various countries. BlockFi locked in a regulatory showdown down with three states, and most recently, Uniswap being investigated by the SEC.
Crypto Market Will Benefit From Regulation
Regulation may not be an easy topic in crypto, but it does not make it any less important. Exchanges already realize that if they wish to grow in the long-term, they are going to have to work with regulators.
To this end, Sam Bankman-Fried, CEO and co-founder of FTX exchange, said in an interview that he was taking regulation “extremely seriously.” The CEO believes that working with regulators will ensure the survival of the industry. Adding in that exchanges working with regulators will ensure that the rules being created do not harm the market, “killing the use for it in the first place.”
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It is still not clear where most crypto products fall when it comes to regulatory practices. But Gensler believes decentralized finance platforms fall under the purview of the SEC. “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,” Gensler said to the Aspen Security Forum. “These products are subject to the securities laws and must work within our securities regime.”
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Featured image from Reuters, chart from TradingView.com