Cryptocurrency trading will not survive the next five to ten years unless it adopts a robust regulatory structure, according to the chairman of the United States Securities and Exchange Commission in an interview published yesterday.
According to Gary Gensler of the Financial Times, exchanges and the decentralised finance sector are jeopardising their future by denying that many cryptocurrencies are securities and resisting requests to register with the SEC.
With a market capitalization of over $2 trillion, cryptocurrency is “at the level and nature that if it’s going to have any importance five and ten years from now, it’s going to be within a public policy framework,” according to Gensler. “History tells us that it doesn’t survive long outside. Ultimately, finance is about trust.”
Investor safeguards are “really sparse” in the business, according to Gensler. Even fundamental anti-money-laundering and know-your-customer regulations — known as AML and KYC in banking and finance — have just recently been adopted by many leading exchanges, including No. 1 Binance.
Prior to becoming President Joe Biden’s top securities regulator, Gensler taught a blockchain and cryptocurrency class at MIT and was a frequent and notable speaker at industry events.
Gensler expressed disappointment that the majority of bitcoin exchanges and other DeFi entities have been resistant to his recommendations to register with the SEC. He stated:
“Talk to us, come in. There are a lot of platforms that are in operation today that would do better engaging and instead there is a bit of begging for forgiveness rather than asking for permission.”
One issue is that US law has yet to catch up to cryptocurrencies, which are not officially classified as securities.
The most visible of these conflicts is that between the SEC and Ripple. According to the agency, the corporation and two top executives engaged in a seven-year illicit sale of a security in the form of XRP, the sixth-largest cryptocurrency by market capitalization.
Despite having barred US users, the Poloniex exchange agreed to a $10 million settlement with the SEC on August 9 for failing to register.