SEC Chair: There’s No Reason to Give Cryptocurrencies A Special Status

On Monday, August 22, SEC chairman Gary Gensler published an op-ed piece in Wall Street Journal sharing his views on how crypto markets should be treated. Drawing a comparison with the car industry, he said that just as the safety standards for the car industry have remained the same for the last six decades, the investor protection standards also remain the same.

Gensler said that there’s no reason to give any special status to digital assets. Instead, they should be treated like capital markets. He also noted how investors have been mercy of the crypto lending platforms going bankrupt this year. With their funds frozen, investors have no choice but to knock at the doors of the court. The SEC Chair wrote:

There’s no reason to treat the crypto market differently from the rest of the capital markets just because it uses a different technology. Recent market events show why it is critical that crypto firms comply with securities laws.

In recent months, some crypto lending platforms have frozen their investors’ accounts or gone bankrupt. When it comes to bankruptcy, these investors have to get in line at the court.

Getting Securities Laws to Cryptocurrencies

The U.S. Securities and Exchange Commission (SEC) has been keen enough to introduce securities laws to the crypto space. The SEC has also been fighting an 18-month-long battle with blockchain startup Ripple in this regard.

Gensler cites the $100 million Settlement of crypto-lending platform BlockFi earlier this year. The SEC chief said that the issue wasn’t about what BlockFi had borrowed. Rather, it was what it did with the customer’s borrowed assets. Also, the firm said that the SEC didn’t provide the required disclosure to investors. He writes:

Compliance with our laws protects the investing public. Unfortunately, some platforms that offer crypto lending aren’t complying with the applicable requirements.

He further argues that the rules for lending have been around for decades and the crypto lending platforms aren’t different. He said that he would encourage crypto lending platforms to talk to the SEC. Gensler believes that this would be of greater benefit to crypto investors and the crypto market.