The issue of regulating cryptocurrencies has been something that the crypto industry has been looking forward towards for a very long time. Unfortunately, it never did come to pass, as of yet. But, the US SEC now has a new chairman, Gary Gensler, who is extremely familiar with crypto, being an MIT professor who taught several crypto-related classes. Thanks to his familiarity with the industry, things might change in the US as time goes by.
In a recent interview with CNBC, he spoke about crypto and the issues of regulating it.
The problem of regulating cryptocurrencies
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According to him, the issue of regulating crypto is far from simple. A lot of “crypto tokens,” as he insisted on calling them, are, in fact, securities. With that in mind, the SEC has been extremely busy dealing with them, as these projects claimed otherwise, and as such, they remained unregistered, and worse than that — they continuously invited the crypto community to invest into their tokens.
However, he admitted that there are some projects, like Bitcoin, that truly are digital, scarce stores of value, but are highly volatile. This volatility is what attracts investors, for the most part. Not to mention that coins like these have lower correlation with other markets, which allows them to function in an uninterrupted asset class, with no outside influences.
The problem is that all of this also makes crypto too unpredictable, which is why the market needs greater investor protection. With the SEC not having the federal regime overseeing crypto exchanges, there is little that regulators can do to protect investors who want to trade coins on exchanges.
According to Gensler, this is a huge gap in the system currently, and it needs to be addressed. The question is — who can and will address it?
Gensler said that the SEC’s sister agency, the CFTC, has some limited anti-fraud and anti-manipulation authority. However, there is no federal authority that would bring the regime to crypto exchanges. In other words, it is not that the crypto industry cannot be regulated. The problem is that there is no regulatory body that would have that authority at this time.