The chairman of the US Securities and Exchange Commission, Gary Gensler, used a routine congressional oversight hearing to spell out some of his views on cryptos.
At the House Financial Services Committee hearing, Gensler was asked about crypto regulation and whether the SEC had a remit over the matter – a reference to questions over whether some crypto activities fall under the agency or the Commodity Futures Trading Commission.
Although refusing to single out any specific cryptocurrency, Gensler stated that he saw cryptos falling under the SEC’s regulation because ‘you’re raising money from somebody else, and the investing public has a reasonable anticipation of profits based on the efforts of others, that fits within the securities law’, adding that ‘most’ of the 5 to 6 thousand existing cryptos would fall under that definition.
The chairman of the agency also stated his main concern is with the crypto exchanges, given how they engage with customers, making the case for regulating trading and lending platforms, including decentralised ones: ‘Investors are basically giving up ownership rights. They transfer what’s called a private key to the platform (…) and the platforms take custody’, Gensler said.
SEC’s chairman also voiced his concerns over stablecoins – cryptos tied to assets like fiat currencies or precious metals: ‘I think the $125 billion of stablecoins we have right now are like the poker chips at a casino, and I think they create risks in the system’. He then added that it could ‘undermine traditional banking systems if it is not brought inside the remit of banking’.
"“There is no doubt that the crypto world ought to be adequately regulated so that the ordinary citizen can trust digital assets as much as they trust fiat currencies, and it would be a good thing if the world’s most influential financial centre could define the regulatory framework for cryptos in the US as the uncertainty isn’t helpful. But there is a risk of over regulating the sector especially as countries fear losing their ability to directly control their monetary systems”, commented Eduardo Carvalho, the founder and CEO of Dynasty Global Investments AG."
Independently from the SEC’S work, the US Department of Justice announced it has created a team to investigate cryptocurrency-related crime. In a release, it stated that the National Cryptocurrency Enforcement Team will handle ‘crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors. The mixing and tumbling services can obscure the source of a cryptocurrency transaction, by mixing it with other funds.