Crypto environment like “the Wild West”

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In a recent speech to the Aspen Security Forum, SEC Chairman Gary Gensler, speaking for himself and not as a representative of the SEC, commented on the lawlessness of the current crypto space and hinted at impending regulations for DeFi and stablecoins, as well as a Bitcoin ETF structure that the SEC would potentially be willing to seriously consider.

Gensler spoke about the creation of crypto by the entity known as Satoshi Nakamoto in 2008, noting that during his time at MIT, before he started working for the SEC, he came to value the creation of crypto.

I’ve come to believe that while there has been a lot of hype masquerading as a reality in crypto, Nakamoto’s innovation is real. In addition, he has been and could continue to be a catalyst for change in finance and money, Gensler said.

While basically cryptocurrencies seek to provide a type of private currency without an intermediary, Gensler believes that in their current state, they do not perform all the functions of money: a store of value, a unit of account. and a support. exchange. At best, according to Gensler, cryptocurrencies are highly speculative stores of value, which so far have not been used much as a unit of account, and when used as a medium of exchange, c is often for illicit purposes.

At its core, the SEC’s primary goal is investor protection. Looking at the current crypto landscape, Gensler said that I think we now have a crypto market where many tokens can be unregistered securities, with no disclosure or market oversight required, making investors both vulnerable. and open to price manipulation. SEC staff continue to seek out and protect investors from “unregistered sales of securities.”

Gensler hints at crackdown on DeFi and Stablecoin

Gensler has issued a warning regarding decentralized finance (DeFi) platforms. He argued that most DeFi platforms carry an average of between 50 and 100 tokens at any given time, and that such a platform would be highly unlikely to carry any securities, depending on legal status. of each token.

Make no mistake: as long as there are securities on these trading platforms, under our laws they must register with the Commission unless they meet an exemption. Make no mistake: if a lending platform offers securities, it is also within the purview of the SEC, Gensler proclaimed.

Stablecoins haven’t escaped Gensler’s notice either. He explained that most crypto-to-crypto transactions actually use stablecoins as a component of the process. He mentioned that in July almost 75% of the exchanges that took place on crypto platforms were between a token and a stablecoin. Gensler said stablecoins are potentially used to intentionally circumvent public policy regarding the financial system and traditional banking. As stablecoins could be investment companies and securities themselves, they would be beholden to the investment company law which protects investors.

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A crypto ETF that could pull the rally together

Finally, Gensler touched on ETFs that have been submitted to the SEC. He referred to investment vehicles exposed to crypto assets that already exist, the largest of which is the Grayscale Bitcoin Trust (GBTC), with $ 25 billion in assets under management. Gensler has also drawn attention to Bitcoin futures mutual funds that trade on the Chicago Mercantile Exchange (CME).

Gensler seemed to imply that he would welcome a crypto ETF filed under 1940s law, but which would follow the strict rules of a mutual fund.

Most crypto ETFs subject to SEC review were filed under the 1933 Act which allows exchanges to list products. Gensler said he plans to make an ETF deposit under the Investment Companies Act 1940 at one point, which provides significant protection for investors.

Given these important protections, I look forward to staff review of these deposits, especially if these are limited to those Bitcoin futures contracts traded by CME, Gensler said.

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