“There’s No Reason To Treat The Crypto Market Any Different From The Rest Of The Capital Markets Just Because It Uses Different Technology”: SEC Chief Gary Gensler

“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.


—Gary Gensler, Securities and Exchange Commission

What do automakers have to do with crypto lending platforms? Defaulting consumers and investors to be protected – this is true for both motor vehicles and investment vehicles, says Gary Gensler, chairman of the US Securities and Exchange, in a Wall Street Journal op-ed published Friday evening.

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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” Presumptions

Recent market events, such as the actions of some crypto lending platforms to freeze investors’ accounts or seek bankruptcy protection, demonstrate why it is essential for crypto businesses to comply with securities laws. securities, Gensler said.

It doesn’t matter what type of asset an investor has encountered in a crypto app – silver, gold, bitcoin, chinchillas or something else; it’s what the crypto platform does that determines the protections afforded by law, he argued.

Investors have an interest in knowing what is behind the crypto firm’s claims that it will provide a certain 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. Over decades of cases, the Supreme Court has made it clear that a product’s economic realities — not labels — determine whether it is 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.

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