US SEC Chair Gary Gensler
(U.S. Securities and Exchange Commission Chairman Gary Gensler)

Wall Street’s top regulator says cryptocurrency market is ‘Wild West’

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US Securities and Exchange Commission (SEC) Chairman Gary Gensler said Tuesday (Aug. 3) that his agency needs needs more authority from Congress to regulate the fast-growing cryptocurrency market.

“We need additional Congressional authorities to prevent transactions, products, and platforms from falling between regulatory cracks. We also need more resources to protect investors in this growing and volatile sector,” Gensler said in a speech at a national security conference hosted by the Aspen Institute.

Additionally, the head of Wall Street’s top regulator described the nascent crypto market, now worth trillions, as the “Wild West.”

“Right now, we just don’t have enough investor protection in crypto. Frankly, at this time, it’s more like the Wild West,” Gensler said. If we don’t address these issues, I worry a lot of people will be hurt.”

“This asset class is rife with fraud, scams, and abuse in certain applications,” he added. “There’s a great deal of hype and spin about how crypto assets work. In many cases, investors aren’t able to get rigorous, balanced, and complete information.”

Unlike in the securities and derivatives markets, no single regulator oversees crypto exchanges or brokers. As the market value of the asset class has exploded, so have scams.

The Federal Trade Commission (FTC) reported earlier this year that almost 7,000 investors lost $80 million total between October and March due to scams involving bitcoin and other cryptocurrencies. According to the FTC, the reported median loss on scams is $1,900, and the number of reports is up by about 12 times year over year.

“The American public is buying, selling, and lending crypto on these trading, lending, and DeFi platforms, and there are significant gaps in investor protection,” Gensler, who was sworn in as SEC chair earlier this year, said. “Make no mistake: To the extent that there are securities on these trading platforms, under our laws they have to register with the Commission unless they meet an exemption. Make no mistake: If a lending platform is offering securities, it also falls into SEC jurisdiction.”

bitoin price 03 august 2021
(Bitcoin price 03 august 2021 Source: Coindesk)

Decentralized finance, or DeFi, is an umbrella term in the public blockchain space, a new way to execute financial transactions through applications that run autonomously across computer networks where users can deposit their digital assets and earn returns, borrow or loan money and even buy and sell derivatives of blue-chip equities.

Gensler has spent several years examining the technological possibilities that digital assets and blockchain represent while teaching at the Massachusetts Institute of Technology but has made it clear that he intends to take a hands-on approach when it comes to new financial technologies.

“While I’m neutral on the technology, even intrigued — I spent three years teaching it, leaning into it — I’m not neutral about investor protection,” the veteran Democratic regulator told Bloomberg. “If somebody wants to speculate, that’s their choice, but we have a role as a nation to protect those investors against fraud.”

Bitcoin, the most popular cryptocurrency, has traded north of $60,000 at certain points,  but has been volatile in recent months and in late July dipped below $30,000.

“The remarks by the Securities and Exchange Commission chair were the latest evidence that regulators were struggling to rein in the booming market for Bitcoin and other digital currencies that reached a value of $2 trillion this year” The Politico wrote.

Is the crypto party ending soon?