Gary Gensler, the new SEC chief in a recent interview with CNBC talked about the need of updating regulations to counter the growing trend of social media manipulation of financial markets. The social media frenzy started this year with the GameStop short squeeze where a Reddit group by the name of wallstreetbets, that led to the skyrocketing of $GME stock Price and billion in liquidation in a short position. Gensler during the interview said,
“We are going to be freshening up our rules. To ensure that while retail investors and any individual have first amendment rights to speak– that they are not misleading the public, they are not manipulating the public, manipulating the market.”
"We are going to be freshening up our rules," says SEC Chair on social media. "To ensure that while retail investors and any individual has first amendment rights to speak– that they are not misleading the public, they are not manipulating the public, manipulating the market." pic.twitter.com/pz05GTvKl7
— Squawk Box (@SquawkCNBC) May 7, 2021advertisement
The GameStop frenzy was followed by trading apps such as Robinhood halting the trade to avoid losses to traders that led to the involvement of Congress and many other senators. A similar social media-based pumping is being observed with the Dogecoin cryptocurrency pushed by the Tik Tok-based influencers and many have warned that the end might not be pleasant for many amateur traders who are putting their life savings in the meme currency with infinite supply.
Crypto Community Has High Hopes From Gensler
Gensler who has taken over Jay Clayton as the new head of the SEC is seen as pro-crypto primarily because of his MIT teaching stint where he taught about blockchain and cryptocurrency. Clayton was seen as a conservative when it comes to crypto mostly because of his passive stance on digital assets. Clayton’s term overlooked the rejection of every Bitcoin ETF proposal.
Many crypto proponents believe Gensler could play a key role in the approval of the first Bitcoin ETF in the United States. During his formal interview post taking over the chair of the SEC, Gensler has shed light on the clarity in regulations for digital assets and updating rules to avoid market manipulation through social media.