SEC sees need for regulation of trading platforms
In an interview with the Financial Times, the head of the SEC, the US financial watchdog, does not see exchange platforms existing outside of a ” public policy framework”, in other words regulation.
Appointed last January by Joe Biden, Gary Gensler is considered to have a rather positive view on cryptocurrencies, unlike his predecessor Jay Clayton. But he believes that the large valuation of the cryptocurrency market, now estimated at $2 trillion, cannot exist without a minimum of regulatory constraints.
For him, the exchange platforms are jeopardizing their long-term survival if they do not work hand in hand with the regulators. The SEC director prefers to remain “ technology neutral “, considering that digital assets are no different from any other and that, consequently, they must comply with the same legislation.
Gary Gensler goes even further, believing that a well-defined legal framework can protect against illicit activities while maintaining financial stability.
The SEC director adds that he believes you can’t succeed in isolation from society:
“History tells us, you don’t survive long in isolation. Finance is ultimately about trust.”
Gensler, of course, fails to mention that illicit activities are mainly financed by fiat currencies, whose name means “trust.” It should also be remembered that the creation of a trusted financial system, which does not require giving full decision-making power to an institution, is precisely the credo of cryptocurrencies. Can we really talk about trust when a financial institution unilaterally decides to print greenbacks?
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The SEC is making a call to the platforms
Despite his observation, Gensler doesn’t seem to have changed his mind about cryptomurrencies and is convinced that they are assets of the future. Rather than casting opprobrium, the SEC director prefers to convince exchange platforms to talk to the US financial watchdog.
Gensler would like to see Coinbase, Kraken and all platforms operating in the US apply for a controlled exercise license rather than beg for forgiveness every time one of them gets slapped on the wrist.
Despite his stance, Gary Gensler remains listened to in the crypto-asset sphere. A former professor at MIT, he taught blockchain and cryptocurrencies to his students, en insisting on this innovative technological aspect. Although his current job obliges him to remain neutral, he is more inclined to accompany rather than prohibit.
For the SEC director, regulation is essential, because the vast majority of transactions today take place through exchange platforms. Above all, ” 95% ” of these transactions are pure speculation on the part of investors.
The SEC director also looks at decentralized finance (DeFi)
Gary Gensler also mentioned DeFi, which would pose the same difficulties as centralized trading platforms by evolving outside any regulatory framework. While he welcomes the fact that investors can interact more directly, he would like to see the SEC exercise authority over an entity like Uniswap.
For Gensler, the concept of DeFi is not really decentralization, as it would involve certain governance mechanisms or systems that are close to centralization. The name DeFi would thus be inappropriate, because, according to him, it cannot exist without the intervention of a person or a group of people who have created the user interface.
On the other hand, Gensler admits that DeFi is less centralized than Wall Street. More importantly, he is positive about it, believing that it represents something interesting that lies between the all-centralized and the all-decentralized. Will his knowledge of the field be positive for an industry that is still too poorly understood, or will it lead to too much oversight? We’ll know in the coming months.
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About the author: Benjamin Allouch
Formerly a lawyer specializing in personal data and digital law, I quickly became interested in Bitcoin, blockchain technology and their legal implications. I am now a freelance consultant and writer in the field of cryptocurrencies and blockchain.
All articles by Benjamin Allouch.