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SEC boss issues tough warning to cryptocurrency platforms

By Rob Griffin

11:49, 1 September 2021

SEC sign outside building
SEC insignia - Photo: Shutterstock

Gary Gensler, chair of the US Securities and Exchange Commission (SEC), has warned cryptocurrency trading platforms they must work within the country’s regulatory framework.

In an interview with the Financial Times, Gensler said a refusal would mean the industry putting its own longer-term survival at risk.

“At about $2trn of value worldwide, it’s at the level and the nature that if it’s going to have any relevance five and 10 years from now, it’s going to be within a public policy framework,” he said. “History just tells you, it doesn’t last long outside. Finance is about trust, ultimately.”

Technology-neutral

Gensler told the publication he remained “technology-neutral” but insisted cryptocurrencies were no different from other assets when it came to issues such as public policy imperatives.

These include investor protection, guarding against illicit activity and maintaining financial stability.

He also expressed disappointment with the industry’s response to his suggestion that trading platforms register with the SEC, and urged them to come in for talks.

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Held to standards

Nigel Green, founder and chief executive of deVere group, which offers advisory services, agrees with Gensler’s warning.

“Crypto is very much here to stay as financial assets and as mediums of exchange,” he said. “Therefore, they must be brought into the regulatory tent and be held to the same rigorous standards as the rest of the financial system."

The best way to do this, Green argued, is through the exchanges.

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“Nearly all foreign exchange transactions go through banks or currency houses, and this is what needs to happen with cryptocurrencies,” he said.

Previous experience

Before starting at the SEC, Gensler taught at the Massachusetts Institute of Technology about the intersection of finance and technology.

This included courses on cryptofinance, blockchain technology, and money. Therefore, he’s seen as very well placed to comment on the industry’s development.

Speaking at the Aspen Security Forum last month, he said being sure of achieving core public policy goals was important as new technologies came along.

“In finance, that’s about protecting investors and consumers, guarding against illicit activity, and ensuring financial stability,” he said.

SEC mission

Gensler also pointed out that, historically, financial innovations haven’t thrived long outside of public policy frameworks.

“At the heart of finance is trust – and at the heart of trust in markets is investor protection,” he said. “If this field is going to continue or reach any of its potential to be a catalyst for change, we better bring it into public policy frameworks.”

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