“We can do without the idea that crypto lending is unregulated. On the contrary, the rules have existed for decades. The platforms do not follow them. ”
What do automakers have to do with crypto lending platforms? Consumers and investors deserve protection — that’s true for both motor vehicles and investment vehicles, said Gary Gensler, chairman of the US Securities and Exchange, in a Wall Street Journal op-ed Friday. evening.
Just as the National Traffic and Motor Vehicle Safety Act signed by President Lyndon Johnson in 1966 protects motorists, the federal securities laws signed by President Franklin Roosevelt during the Great Depression of the 1930s were intended to protect investors.
See also: Your funds held on crypto platforms are not protected by government insurance. FDIC Warns US Branch of FTX to Discontinue “False and Misleading” Claims
Recent market events, such as the freezing of their investors’ accounts or the failure of some crypto lending platforms, show why it is essential for crypto companies to comply with securities laws, he said. -he declares.
It doesn’t matter what kind of asset an investor puts into a crypto app – silver, gold, bitcoin, chinchillas or whatever, it’s what the crypto platform does that determines the protections. provided by law, he argued.
Investors have an interest in knowing what is behind the crypto firm’s claims that it will provide some return. Disclosure helps the investor understand what is being done with their assets.
The crypto platform cannot avoid complying with proven investor protections by sticking a label on the product or on the benefits promised, whether it is a lending platform, a crypto exchange or of a decentralized financial platform, he wrote. Through decades of cases, the Supreme Court has made it clear that a product’s economic realities — not labels — determine whether it’s a security under securities laws.
That’s what the Securities and Exchange Commission found in a recent settlement with crypto lending platform BlockFi.
Non-compliance is not an inevitable result of the encryption business model or underlying encryption technology. Rather, it’s as if these platforms are saying they have a choice — or even worse, saying “Catch us if you can,” Gensler concluded.
An expanded version of this story appears on WSJ.com.