Asset Class Lacks Protections, Leaving Investors Vulnerable
September 1, 2021–Cryptocurrency platforms that provide direct access to millions of people leave investors “vulnerable” and are “rife with fraud, scams, and abuse,” according to Gary Gensler, chairman of the U.S. Securities and Exchange Commission.
Need for Public Policy
Speaking by videoconference to the European Parliament Committee on Economic and Monetary Affairs, Gensler warned that “financial innovations throughout history don’t long thrive outside of public policy frameworks.”
Gensler is not the first public official to warn about the inherent dangers of investing in cryptocurrencies. Policymakers are increasingly taking an interest. The Bank for International Settlements warned about the rapid rise of virtual and cryptocurrencies in the international marketplace in 2019.
Today, the head of the SEC added his voice to the growing chorus of policymakers who want to regulate the industry.
“While I’m technology-neutral, I am anything but public policy-neutral,” Gensler said. “As new technologies come along, we need to be sure we’re achieving our core public policy goals. Further, for those who want to encourage innovations in crypto, I’d like to note that financial innovations throughout history don’t long thrive outside of public policy frameworks.”
–SEC Chair Gary Gensler speaking to the European Parliament Committee on Economic and Monetary Affairs
Stablecoins Sidestep Policies
Also, Gensler noted the rise in the use of stablecoins–a type of cryptocurrency that uses tokens as an exchange. Facebook Diem is a popular example. The current stablecoin market is worth $116 billion, according to Gensler. The problem, he said, is that the tokens are increasingly exchanging with cryptocurrency platforms. Furthermore, he added, that helps people “sidestep a host of public policy goals,” such as anti-money laundering, “connected to our traditional banking and financial system.”
EU Working on Reforms
The European Parliament is working on a package of digital finance reforms. Germany’s Berger Stefan is leading the charge to create a legal framework that defines regulation for cryptocurrencies. The EU Commission adopted the Digital Finance package in 2020.
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