SEC Chair: Crypto lenders could work with regulators one day
Gary Gensler, SEC Chair, has said crypto lenders could potentially get SEC backing — but only if they work with the regulator and offer the consumer protections seen in traditional finance
Gensler was indirectly referring to the recent actions of Celsius, which he compared to the meme stock controversy when traders were blocked from placing buy orders during the Gamestop (GME) price run. Celsius similarly blocked withdrawals from its platform yesterday amid the wider market crash
Gensler argued that crypto platforms could fall under the SEC’s jurisdiction if exchanges are offering cryptocurrencies regarded as unregistered securities
A recent bill, proposed by US Senators Cynthia Lummis and Kirsten Gillibrand, would seek to give regulatory clarity to crypto assets. One of the key components would be to make crypto transactions under $250 tax-free — which could make using crypto payments an experience closer to using fiat currencies. In addition, the bill will seek to codify the regulatory requirements for different types of crypto assets to bring much–needed clarity to the space.
When asked about the bill by the Wall Street Journal, Gensler said he was worried about the knock-on effects for other financial markets, “We don’t want to undermine the protections we have in a $100 trillion capital market”. He argued that the changes were too sweeping, and that making crypto companies non-compliant for SEC oversight, it could open the floodgates for other businesses to demand they are not overseen either. “We don’t want our current stock exchanges, our current mutual funds, our current public companies to sort of inadvertently, by the stroke of a pen, say ‘I want to be non-compliant as well, I want to be outside this regime’. That, I think, has been quite a benefit to investors and economic growth over the last 90 years”.
When it comes to lending, Gensler argued that banks and other businesses are held accountable by the SEC to ensure they give fair disclosures and are honest to the public. Crypto lending, Gensler continued, must also be beholden to this to ensure consumers are protected.
Gensler did acknowledge the high rates of around 17% APY offered by crypto lenders were an attractive feature for consumers. However, he added it was unclear how these returns were generated and this also needed further examination before crypto lending had SEC support.
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