'There is no reason to treat the crypto market differently from the rest of the capital markets just because it uses a different technology': SEC chief Gary Gensler

‘There is no reason to treat the crypto market differently from the rest of the capital markets just because it uses a different technology’: SEC chief Gary Gensler

“We can get rid of the idea that crypto loans are not subject to regulation. Rather, the rules have been around for decades. The platforms don’t follow them.’


— Gary Gensler, Securities and Exchange Commission

What do automakers have to do with crypto lending platforms? Consumers and investors deserve protection — that applies to both motor vehicles and investment vehicles, US Securities and Exchange chairman Gary Gensler argues in a Wall Street Journal op-ed published Friday night.

Just as the National Traffic and Motor Vehicle Safety Act, signed by President Lyndon Johnson in 1966, protects motorists, the federal securities laws, signed by President Franklin Roosevelt during the Great Depression of the 1930s, were designed to protect investors.

Also see: Your money on crypto platforms is not protected by government insurance. FDIC warns US branch of FTX to stop ‘false and misleading’ claims.

Recent market events, such as the moves of some crypto lending platforms to freeze investor accounts or seek bankruptcy protection, show why it is critical that crypto companies comply with securities laws, Gensler said.

It doesn’t matter what kind of assets an investor puts into a crypto app – cash, gold, bitcoin, chinchillas, or anything else; it is what the crypto platform does that determines what protections are provided by the law, he argued.

Investors benefit from knowing what is behind the crypto company’s claims that it will deliver a certain return. Disclosure helps the investor understand what is being done with his or her assets.

The crypto platform can’t help but comply with tried and tested investor protections by putting a label on the product or on the promised benefits, be it called a lending platform, a crypto exchange or a decentralized funding platform, he wrote. In dozens of cases, the Supreme Court has made it clear that the economic reality of a product — not its labels — determines whether it is a security under securities laws.

The Securities and Exchange Commission discovered this in a recent settlement with crypto lending platform BlockFi.

Non-compliance is not the inevitable consequence of the crypto business model or underlying crypto technology. Rather, it’s like these platforms say they have a choice — or worse, say, “Get us if you can,” Gensler concluded.

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