Gary Gensler, Chairman of the SEC, emphasizes that cryptocurrency markets are vulnerable to manipulation.

Gary Gensler, the head of the United States Securities and Exchange Commission (SEC), has urged for greater investor protection in cryptocurrency markets. “This asset class is rife with fraud, scams, and abuse in certain applications,” he said. “In many cases, investors aren’t able to get rigorous, balanced, and complete information on tokens or trading and lending platforms.”

During a meeting of the SEC‘s Investor Advisory Committee last week, SEC Chairman Gary Gensler expressed worry about the cryptocurrency markets.

The Investor Advisory Committee, created under Section 911 of the Dodd-Frank Act, advises the SEC on regulatory objectives such as “initiatives to safeguard investor interests and to enhance investor confidence and the integrity of the securities markets.”

During his address, Gary Gensler expressed some worries about the cryptocurrency markets.

He began by noting that “Satoshi Nakamoto’s ‘Bitcoin Whitepaper’ and the ensuing crypto markets have been drivers for change.” In August, Gensler stated that Bitcoin’s pseudonymous creator’s “invention is genuine,” and that “it has been and may continue to be a driver for change in the disciplines of finance and money.”

“This is an asset class that belongs inside public policy frameworks of looking after investors, guarding against illicit activity, and protecting our financial stability,” Gensler told the Investor Advisory Committee, citing the market size of all cryptocurrencies. He stated:

Unfortunately, this asset class is rife with fraud, scams, and abuse in certain applications … In many cases, investors aren’t able to get rigorous, balanced, and complete information on tokens or trading and lending platforms.

“Right now, we just don’t have enough investor protection in crypto,” the SEC chairman explained. “The American public is buying, selling, and lending crypto on trading, lending, and decentralized finance (defi) platforms, where investor safety is lacking.” He emphasized:

This leaves markets open to manipulation. This leaves investors vulnerable. If we don’t address these issues, I worry a lot of people will be hurt.

Gary Gensler went on to say that many cryptocurrency “tokens are marketed and sold like securities.” In response to whether a token constitutes a security, he stated, “There’s really a lot of certainty on that front.” Congress created the concept of a security in the 1930s, which covered roughly 20 assets such as stock, bonds, and notes.”

“One of the elements is an investment contract,” the SEC chairman said, stressing that many tokens in the crypto exchanges “may be unregistered securities, with no necessary disclosures or market monitoring.”

Gary Gensler closed his address by encouraging crypto platform operators and token issuers to “come in and talk to the SEC staff.”

“Throughout history, financial innovations haven’t yet thrived for long outside of our public policy frameworks,” he continued. If this area is to persist or achieve any of its promise as a catalyst for change, we must incorporate it into public policy frameworks.”

Patrick

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