U.S. Securities and Exchange Commission Chair Gary Gensler has pushed for more efforts to regulate crypto exchanges in the name of consumer protection.
Speaking at an event hosted by the University of Pennsylvania Carey Law School on April 4, the SEC boss said that he staff to collaborate with the Commodity Futures Trading Commission (CFTC). The joint effort by America’s top financial regulators plans to supervise trading platforms that offer a mix of securities and commodities.
The issue remains that regulators in the United States have yet to officially clarify what constitutes a security, leaving many companies in a state of limbo with regard to their status regarding cryptocurrencies.
More rules needed
According to Bloomberg, he said that more rules are needed for exchanges “because retail investors are currently vulnerable to scams and market manipulation.”
“I’ve asked staff to consider how best to register and regulate platforms where the trading of securities and non-securities is intertwined,” he added.
Currently, the SEC, which has labeled crypto holdings as liabilities, has jurisdiction over securities while the CFTC deals with derivatives markets, and crypto is still a grey area due to the lack of a regulatory framework.
This has prompted a debate over which agency should regulate crypto. Derivatives exchanges such as FTX would prefer the CFTC to be in control, but the SEC chair and a number of U.S. lawmakers think that crypto comes under the securities umbrella. Gensler confirmed this assumption, stating:
“The fact is, most crypto tokens involve a group of entrepreneurs raising money from the public in anticipation of profits – the hallmark of an investment contract or a security under our jurisdiction,”
He is also campaigning for more regulations to “protect consumers” but many crypto industry experts assert that this will simply stifle the industry and innovation, effectively achieving the opposite. The large funds get approved by the SEC are usually only available to institutional investors leaving the retail group with few options.
Security or commodity?
Senator from Wyoming, Cynthia Lummis, asserts that Bitcoin is a commodity. In an interview on NBC late last month, she said in reference to Bitcoin:
“I own a commodity … I believe it will be currency someday, but at this point in its existence it is a commodity just like cattle, wheat, gold. At some point though, it will become a means of payment which it’s not right now but it’s going to happen really fast.”
There are deep divisions regarding crypto between policymakers on both sides of the political divide in the U.S., and these could potentially sway voters in the upcoming midterm elections.
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