Gary Gensler warned that a $2 trillion industry cannot survive in the financial markets without a regulatory framework.
Cryptocurrency trading will not survive the next five to 10 years without embracing a sound regulatory framework, the chairman of the U.S. Securities and Exchange Commission
said in an interview published yesterday.
Gary Gensler told the Financial Times
that by denying that many cryptocurrencies are securities and fighting calls to register with the SEC, exchanges and the decentralized finance sector are risking their future
With a value of around $2 trillion, cryptocurrency is “at the level and the nature that if it’s going to have any relevance five and 10 years from now, it’s going to be within a public policy framework,” Gensler said. “History just tells you, it doesn’t last long outside. Finance is about trust, ultimately.”
Investor protections are “really sparse” in the industry, Gensler told the FT
. Even basic anti-money-laundering
rules — called AML and KYC in banking and financial circles — have only recently
been embraced by many top exchanges like No. 1 Binance
Before taking up the role as President Joe Biden’s top securities regulator, Gensler taught a class on blockchain and cryptocurrencies at MIT, and was a frequent and prominent speaker at industry events.
Gensler said he was disappointed that most cryptocurrency exchanges and other DeFi firms have been largely hostile to his calls
to register with the SEC. He said:
“Talk to us, come in. 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.”
One problem is that U.S. law has not yet caught up with cryptocurrencies, which are not explicitly categorized
The highest profile of these battles is between the SEC and Ripple
. The agency claims that the company and two top executives have engaged in a seven-year-long, illegal sale of a security in the form of XRP
, the sixth-largest cryptocurrency by market capitalization.
Despite having banned U.S. customers, the Poloniex exchange reached a $10 million settlement
with the SEC on August 9 for failing to register.