Gary Gensler, chairman of the Securities and Exchange Commission (SEC), warned on Wednesday that the agency is checking out crypto exchanges, lending platforms, as well as stablecoins—all of which could pose a potential threat to investors.
During his presentation to the EU Economic and Monetary Affairs Committee, Gensler spoke about transatlantic cooperation for financial services.
Token promoters claim many tokens are utilities, which he says is false. He wants platforms to be included within an investor protection perimeter.
He explained that these tokens are not like those used at laundromats. “Investments like these are speculative and therefore should be within investor protection perimeter since they are a source of future savings for individuals."
Moreover, he said, the $116 billion stablecoin industry is "embedded" into the broader crypto sphere. He said he believed, in part, that this allows for those who are seeking and seeking to sidestep current public policy goals.
It's not about what platforms or centralized organizations do, it's about what platforms they use." This can either be trading platforms or lending platforms, according to the U.S SEC chief.
Investors deal directly with one another on decentralized finance platforms (DeFi), and traditional brokers aren't necessary. For regulators, this poses a particular challenge. The Financial Times interviewed him prior to his speech at the European Parliament.
Although DeFi platforms do not have a very centralized structure, he maintains they have a "fair amount of centralization" in terms of their governance, fee models, and incentives.
The rise of crypto exchanges and their profits has prompted more scrutiny.
In a statement last week, the UK's Financial Conduct Authority said Binance, which saw $5 trillion in trading in the last year, has more than 13 million users but no headquarters, was unable to be supervised.
As Gensler explained, if the industry is to remain relevant five and 10 years from now, it must be governed by laws and regulations.
“History tells us that it never lasts outside." He said that trust is at the core of finance.
Additionally, he criticized start-ups that have not registered with the SEC while issuing tokens at risk of being classed as securities. According to Gensler, some Crypto based start-ups are asking for forgiveness instead of permission from the SEC rather than engaging with the regulator.
Gensler admits that today's laws are the result of an outdated "bricks and mortar era."