Securities and Exchange Commission on a Mission to Expand the Scope of Crypto Regulation
The future of long-term viability for cryptocurrency is unclear. That got confirmed by the chairman of the US Securities and Exchange Commission on September 14. Moreover, he emphasized on the scope of crypto regulation. Also, why we should protect the interests of investors.
“I don’t think it’s a good idea to wait until there’s a spill in aisle three,” the chairman said. Further, he said that most cryptocurrencies have attributes of securities. As a result, they should get regulated. The chairman’s statement highlighted the importance of keeping your crypto investments safe.
Major Points of Critique to Expand the Scope of Crypto Regulation
Gary Gensler, the chairman of SEC, is critical of DeFi platforms. DeFi in full is, decentralized financing platform where people can trade cryptocurrency. Also, Gensler believes that DeFi platforms hide extra fees. In fact, he compares cryptocurrency to the “Wild West.” The reason being, the asset class, is full of scams and frauds.
He even referred to Stable coins as “poker chips” in the cryptocurrency casino. Indeed, stable coins are not volatile like other cryptocurrencies. The reason being, they get backed by a reserved set. For example, Tether USD is a stable coin that gets valued against US Dollars. Hence, one coin is equal to US$1. So then, the coins act as a bridge between cryptocurrencies and fiat currencies.
Gensler said that stable coins have aspects of the following:
SEC-regulated investment contracts
Besides, despite the similarities, bank regulators lack the necessary authorities to govern them. So, Gensler’s statements should not get understood in isolation. Similarly, lawmakers like Elizabeth Warren always urge SEC to regulate crypto. As an example, Warren wrote a letter addressed to SEC on July 8, 2021.
In the letter, she mentions that regulatory gaps in crypto endanger its users. In addition, they undermine the safety of our financial markets. While responding to Warren’s letter, Gensler asked the US congress to give SEC additional security.
Cracking the Whip on Coinbase
Gensler pointed out that Coinbase is not under the SEC’s registration. Yet, Coinbase is North America’s biggest cryptocurrency by trading volume. So then, has Coinbase not been subject other platform's disclosure requirements. Even so, they may have dozens of tokens that are securities.
Later this year, Coinbase planned to launch its Lend program. Thereupon, eligible customers will get allowed to earn interest by lending digital assets. Nevertheless, the SEC warned Coinbase that it would take legal action. That is if the Lend program gets implemented. Following that, the program got abandoned.
Gensler’s recent statements sparked talks on crypto regulation. He said, “I think it’s worthwhile to have an investor-protection regime placed around this cryptocurrency.”
Why is Crypto Important?
One use of cryptocurrency is sending and receiving payments at high speed and low cost. For example, it took two and a half minutes to process $99 million Litecoin (LTC).
Another reason is, cryptocurrency enables private transactions. For this purpose, cryptocurrency is common in the darknet’s black markets. Dark web users prefer this form of payment as it is not easy to trace. Often, many dark web users are criminals like hackers and drug cartels. So then, anonymity is crucial.
On the contrary, activists and protestors also use the platform for its anonymity. On top of that, the Tor contributes to security.
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