Speaking at the House Financial Services Committee hearing on October 5, the SEC chief stated that the agency has no plans to follow in China’s footsteps and impose an outright ban on cryptocurrencies. “This is up to Congress,” he added.
Late last month, Andreessen Horowitz’s partner, Katie Hawn, said following in China’s footsteps would be very bad for the United States.
At the same committee hearing last week, Federal Reserve Chairman Jerome Powell reiterated sentiment, saying the central bank has no plans to ban cryptocurrencies.
Congresswoman Maxine Waters, who chaired the committee, commented that the SEC faced historic challenges following the “amazing growth of unregistered and volatile crypto assets, as well as the emergence of crypto brokers, market exchanges, and decentralized protocols.”
Consumer protection priority
In response to questions from Congress, Gensler stated, “It’s about how we bring this area into the consumer-investor protection we enjoy, as well as working with bank regulators and others.”
The concern is whether the Treasury can include crypto within its anti-money laundering and tax compliance frameworks.
The SEC may play to protect consumers, but its recent actions against Coinbase and Ripple could end up costing token holders, or “consumers” in their terms, billions of dollars if the industry is negatively affected.
Representative James Himes asked him for guidance on the topic of cryptocurrency regulation, and Gensler reiterated his previous position. He explained that digital asset exchanges will need to register with the Securities and Exchange Commission, and decentralized exchanges (DEXs) will also be subject to regulations.
“Even on decentralized platforms – so-called DeFi platforms – there is a central protocol. And while they don’t take guardianship in the same way, I think these are the places where we can get the most public policy.”
Concern about “poker chips”
Gensler also reiterated his concerns about stablecoins, which he previously described as casino poker chips, noting that “the financial stability issues that stablecoins can raise” would be a priority for the SEC.
“The $125 billion in stablecoins that we have now is like poker chips in a casino. I think if this continues to grow — and has increased about tenfold in the last year — that could represent that system-wide risk.”
The issuer of the world’s second largest stablecoin, Circle, reported yesterday that it has been recalled by the Securities and Exchange Commission.
Featured image courtesy of The Globe and Mail
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