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U.S. SEC Chair Calls For Immediate Investor Protection in Crypto Markets

Speaking at an Investor Advisory Committee meeting last week, the Securities and Exchange Commission Chairman, Gary Gensler, shared his concerns about the the cryptocurrency markets.

Gensler first acknowledged “Satoshi Nakamoto’s ‘Bitcoin Whitepaper’ as a catalyst for change.” A similar message that he echoed in August when he said that Bitcoin’s pseudonymous creator’s “innovation is real” and “it has been and could continue to be a catalyst for change in the fields of finance and money.”

Next, the SEC head sent the Investor Advisory Committee the unambiguous message of the need for regulation, something he has been calling for almost the entire year. “This is an asset class that belongs inside public policy frameworks of looking after investors, guarding against illicit activity, and protecting our financial stability,” he said.

The Investor Advisory Committee, established by Section 911 of the Dodd-Frank Act, advises the SEC on regulatory priorities that include investor protection, investor confidence and the integrity of the securities marketplace.

Gensler continued with a sense of urgency:

“Unfortunately, this asset class is rife with fraud, scams, and abuse in certain applications … In many cases, investors aren’t able to get rigorous, balanced, and complete information on tokens or trading and lending platforms.”

Adding:

“Right now, we just don’t have enough investor protection in crypto.

The American public is buying, selling, and lending crypto on trading, lending, and decentralized finance (defi) platforms, where there are significant gaps in investor protection.”

“This leaves markets open to manipulation. This leaves investors vulnerable. If we don’t address these issues, I worry a lot of people will be hurt.”

On the hot issue of whether or not crypto assets can be considered securities, noting that many tokens in the crypto markets “may be unregistered securities, without required disclosures or market oversight,” Gensler said crypto businesses and token issuers should “come in and talk to the staff at the SEC” and repeated what he said a few months ago:

“It’s best not to wait for a big spill on aisle three — the crypto aisle, with all its tokens, trading and lending going on — to clean up the investor protection issues.”

Gensler concluded by once more pointing to the need for regulatory clarity:

“Financial innovations throughout history don’t long thrive outside of our public policy frameworks. If this field is going to continue or reach any of its potential to be a catalyst for change, we’d better bring it into public policy frameworks.”

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Author: Peter Siu