Gary Gensler, chairman of the United States SEC, considers DeFi a highly volatile market, full of novel products, which can create new challenges for investors in the country.
The current chairman of the United States Securities and Exchange Commission (SEC), --Gary Gensler, recently indicated that the ecosystems of the decentralized finance (Challenge) They can pose new challenges for the country's regulators and investors, due to their high level of volatility and “novel” products.
Gensler, seen in the industry cryptocurrencies, as a potential friendly regulator because of his extensive knowledge of Bitcoin and technology Blockchain, noted that decentralized financial ecosystems are highly “volatile and speculative”, during their speech presented to the Subcommittee on Financial Services and General Government of the Committee on Appropriations of the United States House of Representatives.
In his speech, Gensler indicated that decentralized lending platforms and so-called DeFi platforms “pose a number of challenges for investors and SEC staff” which, in their opinion, only try to protect investors from possible financial risks. According to Gensler, the country's Securities and Exchange Commission will begin working with other regulators and the US Congress to “fill the gaps” in investor protection that exist in current US laws and regulations.
Gensler also highlighted that the SEC is seeking comments on broker-dealer custody arrangements for cryptocurrencies and tokenized shares on blockchain; making clear mention of the regulation proposal raised by the former president of the SEC, Jay Clayton, in December of last year, the same day he resigned.
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“Volatility and speculation” in crypto markets
In addition to considering the possible risks that DeFi can bring, Gensler stated that cryptocurrencies are also a highly volatile and speculative asset class; although he highlighted his incredible growth in the last 5 years.
For the regulator, the value of cryptocurrencies “fluctuates greatly,” but they have still grown significantly, in scale and valuations, reaching capitalizations of more than $1 billion and higher.
Firstly, he noted that Bitcoin had surpassed a market capitalization of over $1 trillion. Likewise, he highlighted that 80 cryptocurrencies, of the thousands that show CoinMarketCap, exceed a market capitalization of 1 billion dollars, and another 1.600 cryptocurrencies have a capitalization of more than a million dollars. Gensler also mentioned that in the last year, the market capitalization of all cryptocurrencies had grown more than 6 times, although in the last 12 days it has lost more than ⅓ of its value.
By May 26, 2016, 5 years ago, the market capitalization of cryptocurrencies was barely over $9.000 billion. While at the close of this edition, the cryptocurrency market has a capitalization of more than 1,66 trillions of dollars; Bitcoin being the leading cryptocurrency in the industry, with more than 42% of this value (about 710.000 million at the moment).
Regulations against fraud and manipulation
For the president of the SEC, cryptocurrencies and token usage Digital assets can be sold and traded in markets freely and openly, “without compliance with federal securities laws”.
In recent weeks, trading volume within crypto markets has ranged between $130.000 billion and $330.000 billion per day. However, as Gensler highlighted, “these figures are not audited or reported to regulatory authorities”. Therefore, the United States is in need of designing and implementing new regulations that allow reducing the regulatory gap that exists in the crypto industry, to guarantee the protection of investors who participate in these spaces, the regulator said.
Likewise, a new regulatory framework that guarantees transparency to the crypto industry will protect investors against fraud and manipulation, and will make the approval of an ETF (exchange-traded fund) for Bitcoin and other crypto assets more feasible on US soil.
“There are many challenges and loopholes for investor protection in these markets”Gensler said.
The regulator also stated that none of the exchanges or cryptocurrency exchanges in the country has registered as an exchange platform with the SEC, which has substantially reduced the level of protection that the agency can offer to investors who operate in crypto markets using these cryptoasset exchange platforms, giving “increased opportunities for fraud and manipulation”.
Finally, Gensler noted that the Securities and Exchange Commission is preparing to take action against those who fail to comply with current securities laws, in order to ensure investor protection, and keep up with new trends in securities. financial markets, including DeFi and cryptocurrencies.
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