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SEC Chairman Gary Gensler warned today if the agency created regulatory loopholes or arbitrage in the crypto markets it could undermine 90 years of securities law.
Speaking to the Penn Law Capital Markets Association Annual Conference, the SEC head warned as in other start-up fields, many projects in the $2 trillion crypto markets likely could fail.
As an analogy, he pointed out while there was a clamor among crypto supporters there were several crypto ads in the 2022 Super Bowl, Fourteen dotcom companies advertised during the 2000 Super Bowl, most of which are now defunct and the dot-com bubble burst creating significant tremors in the markets.
Gensler noted the crypto market is highly concentrated, crypto-only exchanges, the top five crypto exchanges making up 99 percent of all trading, and two platforms accounting for 80 percent of trading.
“These crypto platforms play roles similar to those of traditional regulated exchanges. Thus, investors should be protected in the same way,” the SEC Chairman asserted.
Because crypto platforms currently list both crypto commodity tokens and crypto security tokens, Gensler said he has asked SEC staff to consider how best to register and regulate platforms where the trading of securities and non-securities is intertwined.
Speaking to the $183 billion stablecoin market, he said it raises public policy considerations around financial stability and monetary policy.
One issue Gensler pointed to is what backs these tokens so it can be made sure that these holdings can actually be converted to dollars one-to-one.
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He cautioned since stablecoins can be used for illicit activity, they may facilitate those seeking to sidestep a host of public policy goals connected to the traditional banking and financial system including anti-money laundering, tax compliance, and sanctions.
On investor protection, Gensler said there are conflicts of interest and market integrity questions that would benefit from more oversight