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 and
know-your-customer 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.
Not Ready?
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 as securities.
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.