SEC Chairman Gary Gensler says crypto trading should fall under existing securities regulation.
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SEC Chairman Gary Gensler is sounding a warning signal about the current state of the cryptocurrency market.
During an interview Monday evening at the Code Conference in Beverly Hills, Gensler never quite said that he intends to bring cryptocurrencies under SEC regulation, but he came close. He asserted that crypto trading platforms are more likely to succeed if they submit to regulation under existing tax compliance, money laundering, and insider trading laws.
The SEC chair noted that the U.S. securities laws tend to take a broad view of what constitutes a securities market—he notes that over time that definition has included things like orange groves and eel farms. The commonality, he says, involves groups raising money from investors who are anticipating profits. “I think there is a lot of clarity in the law,” Gensler said. “This won’t end well if they stay outside the regulatory space.”
Gensler was interviewed by Preet Bharara, the former U.S. attorney for the Southern District of New York, and now the host of a popular podcast. Bharara repeatedly grilled Gensler about his views on crypto—and Gensler left little doubt that he thinks crypto creating, trading, and lending come under existing definitions of securities trading. While Bharara conducted the conversation live on stage, Gensler participated via a video link.
Gensler’s view is that crypto trading would actually benefit from clearer regulation. He makes the analogy that the automobile market benefited from the development of streetlights, stop signs and traffic cops. Football and basketball, he says, wouldn’t likely succeed in the long run without referees and rules.
Gensler told Barron’s earlier this month that stock market structure needs to be rethought to level the playing field for all investors. “We cannot take for granted that the U.S. equity markets will always be considered the most efficient, the most liquid in the world,” he said. “We have to be realistic that technology changes, and we’ve got to update things.”
During the Code interview Monday, Gensler also touched on the regulation of SPACs, or special purpose acquisition companies. He noted that he’s asked the SEC staff to create some recommendations on regulating SPACs, including better transparency, in particular around conflicts involving SPAC sponsors.
Write to Eric J. Savitz at eric.savitz@barrons.com
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