Gary Gensler says the crypto market should be treated no differently
Chairman of the US Securities and Exchange Commission (SEC), Gary Gensler believed that the crypto market should not be treated differently from other capital markets just because it uses different technology.
In a recent op-ed, Gary Gensler confirmed that federal securities laws designed to protect investors are also exposed to the crypto market.
He stated in the editorial: “Recent market events show why it is critical that crypto firms comply with securities laws. In recent months, some crypto lending platforms have frozen investors’ accounts or gone bankrupt. When it comes to bankruptcy, these investors will have to line up in court.”
According to Gary Gensler, the federal government should not be concerned about what kind of cryptocurrencies or assets people are investing in when using crypto applications as lending platforms. Instead, their concern should be the use of these assets by crypto platforms to determine “what protections are afforded by law.”
Furthermore, crypto markets such as lending platforms and crypto investment companies should cover additional protections to prevent fraud.
Gary Gensler argued that crypto platforms cannot avoid compliance for investor protection with the label of a lending platform, a crypto exchange or a decentralized finance platform.
The US Supreme Court has already ruled that the economic realities of a product determine whether it is a security under the securities laws and not labels.
To convey the exact meaning, Gary Gensler gave an example of the crypto lending platform, BlockFi. It is one of the companies behind it Three Arrow Capital’s liquidation. He stated that BlockFi borrowed over $10 billion in crypto from investors with its floating rate offerings. This lending product is considered a security.
BlockFi also invested these borrowed assets in the pool, wrapping them in loans to institutional borrowers and investing funds in other securities. These various investments in various entities make it an investment company.
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He writes, “The question was what it did with the borrowed assets and what it did not do as a firm: provide the necessary disclosures to investors.”
He also added: “Compliance with our laws protects the investing public. Unfortunately, there are some platforms that offer crypto-lending, which do not comply with current requirements.”
Gary Gensler made it clear that they “dispense” with the idea that crypto lending should be outside the regulations.
He believed that the crypto-lending platform must comply with regulations to protect “investors and increase confidence in our markets.”
