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Gensler believes that the SEC should regulate crypto, as well as monitor transactions and platforms, to protect investors from the sector.
The Securities and Exchange Commission (SEC) chairman Gary Gensler wrote a letter to US Senator Elizabeth Warren asking for increased authority to regulate crypto. In the letter, Gensler states that investors are not adequately protected in the crypto markets and are vulnerable to loss, or other mishaps. He further stated that by granting the SEC more crypto oversight authority, the agency would properly monitor “transactions, products and platforms”. Gensler pointed out that Congress needs to prioritize crypto trading, lending, and decentralized finance platforms.
This letter comes in the wake of the failed bid by the industry to remove tax-reporting conditions for crypto brokers from the Senate’s infrastructure bill. Those new requirements could potentially generate $28 billion in revenue for the government over ten years. In addition, the funds received could fund a total of $1 trillion in spending, as stated in the bill.
SEC Always Believed in Crypto Regulation
Gary Gensler has always called for proper oversight over crypto space. The Commission Chair expressed the same stance to the Aspen Security Forum two days before reaching out to Senator Warren. He described the asset class as one with several indiscretions and impropriety. He further stated there that Congress needed to empower his agency with the requisite authority. Doing this would keep crypto “transactions, products and platforms from falling between the regulatory cracks.”
In his letter, Gensler notes that the crypto space offers both centralized and decentralized platforms for users to trade or lend tokens. He goes on to mention that users could employ stablecoins to circumvent traditional banking rules. Some of these rules include anti-money laundering, tax compliance, sanctions, and others.
Gensler argues that stablecoins are pegged to assets like fiat money, other cryptocurrencies, and ETCs like precious metals. He also mentions that the stablecoins are embedded in crypto trading and lending platforms, adding that many crypto-to-crypto trades use stablecoins. In July, an estimated 75% of trading on all crypto trading platforms occurred between a stablecoin and another asset.
According to the SEC chairman, all virtual products, like crypto, are subject to securities laws. He says that as long as these tokens provide synthetic exposure to underlying securities, they have to be regulated. Chairman Gary Gensler pledges to keep using the rule of law to ensure tokens are registered as securities.
Elizabeth Warren commended the Commission Chair’s actions and pledged to “work on legislation to close the regulatory gaps”. She shares the chairman’s sentiments and is also an advocate for increased crypto regulation. Warren is a member of the Senate Banking Committee and chair of its Subcommittee on Economic Policy.
SEC Currently Feuding with Ripple
A recent SEC outing is its ongoing legal battle with Ripple over the network’s employee communications history on Slack. According to an SEC court motion, Ripple is yet to submit additional Slack information. The motion states that the SEC received insufficient and incomplete information from Ripple and that the exchange network is still withholding ‘terabytes’ of data.