On 1st September, Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission (SEC), delivered a speech on the issues ranging from cryptocurrency regulations to disclosure rules on risks related to climate change, before European Parliament committee hearing on Economic and Monetary affairs.

Not on behalf of the Commission or the SEC staff, in solely Gensler’s view, Bitcoin is effectively bringing European and American markets closer together, “this innovation has been and could continue to be a catalyst for change in the fields of finance and money.”

Speaking virtually in the committee on Wednesday, Gensler discussed the SEC’s main concern in financial regulation, including Bitcoin and other digital assets, its efforts to make new rules on digital engagement efforts by app-based stock brokers, and new disclosure rules on climate change risk.

Stating protecting investors, facilitating capital formation, and maintaining fair, orderly, and efficient markets, are parts of SEC’s task, he added, “Our global markets are inextricably linked, with money flowing between them in microseconds. New financial technologies continue to change the face of finance for investors and businesses.”

Though crypto’s potential recognition, Gensler expressed taciturnity over the present regulation on crypto trading by commenting, “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.”

Gensler is particularly worried about the absence of investor protections as these platforms do not have clear obligations in place for investor protection, unlike traditional exchanges. “This $2 trillion asset class right now does not have that (investor) protection. It frankly doesn’t have it in Asia, North America or Europe,” he said.

“There’s no broker in between the public and the platform,” Gensler said. Although that’s a key benefit, but brokers are also heavily regulated. So without them and limited oversight over exchanges, there will be a regulatory gap.

Turning to utility tokens , Gensler contrasted them with laundromat tokens or tickets to the opera, saying that entrepreneurs choose to perceive their tokens in this way to sidestep regulation, but the reality is quite different.

Joyashree Dey

CBW - External Analyst

INDIA