How are cryptocurrencies regulated? Investor protection becomes top priority for new U.S. SEC chairman

Despite expressing an optimistic vision for blockchain technology, the SEC chairman also mentioned that “in order to realize this potential and gain public trust, blockchain technology and the crypto-financial world from which it was born must be brought within the norms of a long-established public policy framework.”

How are cryptocurrencies regulated? Investor protection becomes top priority for new U.S. SEC chairman

In the context of tightening global cryptocurrency regulation, the statement of Gary Gensler, chairman of the Securities and Exchange Commission (SEC), has been a topic of discussion for the United States, which is at the forefront of the cryptocurrency market.

Gary Gensler first worked at Goldman Sachs, a top Wall Street investment bank, and was a partner in Goldman Sachs’ mergers and acquisitions department. During the Clinton administration, he served as deputy secretary of the Treasury, and from 2009 to 2014, he served as chairman of the U.S. Commodity Futures Trading Commission (CFTC), and during his tenure, he was known for his “iron-fisted supervision” in regulating the financial industry. After leaving politics, he moved to the ivory tower as a professor at MIT Business School and a senior advisor to MIT Media Lab’s Digital Currency Initiative.

Previously Gary Gensler was very bullish on blockchain, saying that it has the real potential to change the financial world and reduce the cost, risk and economic rent of the financial system. On April 18 of this year, he was officially sworn in as SEC chairman, which was interpreted by the industry that the SEC would be more friendly to cryptocurrencies.

However, Gary Gensler has repeatedly expressed his views on cryptocurrencies in public since he took office, with the most emphasis on “investor protection” and that ICO issuers and crypto exchange operators should comply with local laws as much as possible.

Investor protection is of utmost importance

A few days ago, Gary Gensler gave a comprehensive overview of the SEC’s basic approach to the cryptocurrency industry.

On May 26, at a hearing before a subcommittee of the U.S. House Appropriations Committee, Gary Gensler said that cryptocurrencies pose a serious problem for policy and investor protection and looked forward to working with other regulators and Congress to fill the gaps in the cryptocurrency market in the area of investor protection.

The cryptocurrency market has many challenges and gaps in investor protection. Tokens currently on the market can be offered, sold and traded without complying with federal securities laws. In addition, no exchange that trades crypto tokens has yet registered as an exchange with the SEC.

In sum, this all significantly reduces investor protections compared to traditional securities markets and correspondingly increases the opportunity for fraud and manipulation. The Commission has prioritized token-related cases of fraud by design or other significant harm.

At the same time, he has expressed concerns about everything from cryptocurrency exchanges to decentralized financial platforms (DeFi). the SEC is also seeking comment on crypto custody for broker-dealers.

Gary Gensler also spoke at a U.S. House of Representatives Financial Services Committee hearing on May 7. This was also his first public statement since assuming his new position. At the meeting, he said that investors lack protection when trading bitcoin on large exchanges.

While the U.S. Securities and Exchange Commission currently has the authority to regulate digital currencies, the fact is that trading in cryptocurrencies is an oversight gap. Under U.S. law, bitcoin is a commodity and therefore not subject to the toughest rules of that SEC.

The SEC currently has a lot of authority in the securities arena, and there are some cryptocurrencies that fall under that jurisdiction, but there are some areas, particularly bitcoin trading on large exchanges, where the public currently has no real protection.

It’s easy to see that “investor protection” is a top concern for the new SEC chairman.

“I’m an optimist.”

After leaving the CFTC chairmanship in 2014, Gary Gensler worked as a professor at the MIT Business School, where he taught a course on blockchain and cryptocurrency, teaching the development of bitcoin and the impact of blockchain on the financial industry.

In 2018, Gary Gensler delivered a keynote speech at a summit titled “Cryptocurrencies: Oversight of New Assets in the Digital Age,” suggesting that blockchain technology has the potential to transform the financial world.

“While there are still many technical and business challenges to overcome, I am an optimist and want to see this new technology succeed. It can reduce costs, risks and economic rents in the financial system.”

Despite expressing an optimistic vision for blockchain technology, Gary Gensler also mentioned that “in order to realize this potential and gain public trust, blockchain technology and the crypto-finance world in which it was born must be brought within the norms of a long-established public policy framework.”

“As with other aspects of finance or other emerging technologies, we must prevent illicit activities such as tax evasion, money laundering, terrorist financing and avoidance of sanctions regimes. We must continue to ensure financial stability, and we must ensure that investors and consumers are protected.” Gary Gensler said.

With regard to initial token offerings (ICOs), which were becoming popular in the global market at the time, Gary Gensler mentioned that, like other crypto assets and crypto exchanges, there were serious instances of non-compliance. “While many U.S. institutions are involved, and current laws apparently cover much of this new activity, there may still be gaps to consider.”

In 2019, Gary Gensler published an opinion piece, “Even if a Thousand Projects Don’t Make It, Blockchain Is Still a Change Catalyst” (Even if a thousand projects fail to Even if a Thousand Projects Don’t Make It, Blockchain Is Still a Change Catalyst”.

The article mentions that the crypto market is rife with scams, frauds, hacks and market manipulation, and it is an indisputable fact that blockchain technology is a catalyst for change.

Given Gary Gensler’s previous optimistic statements about blockchain technology, his election as SEC chairman has been interpreted as a Biden administration-friendly approach to cryptocurrencies.

In response, Ripple CEO Brad Garlinghouse, who was previously sued by the SEC, even tweeted his congratulations, saying that he seeks to work with SEC leadership and the broader Biden administration to show the way for blockchain and crypto innovation in the United States.

But judging from Gary Gensler’s statements since taking office, it appears that the SEC has not become as “friendly” as the industry had expected, but instead has become more knowledgeable about the regulatory doorway.

“The main reason for the U.S. government to appoint Gary, because he was previously the chairman of the CFTC, has very rich experience in the financial derivatives market, more suitable for some of the SEC’s regulatory requirements. Therefore, this appointment does not represent any turnaround in the U.S. government’s regulatory attitude toward the crypto-digital currency industry.” Cao Yin, managing director of Digital Renaissance Foundation, said to Blockchain Daily.

Cao Yin further noted, “The primary purpose of the SEC is to protect investors, and if someone uses digital currencies to raise money illegally or commit financial fraud, the SEC will need to regulate and complete enforcement.”

Posted by:CoinYuppie,Reprinted with attribution to:
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