Crypto assets will not last long outside of a public policy framework because “finance is about trust,” warns Gary Gensler, the chair of the United States Securities and Exchange Commission.
Speaking to The Financial Times, Gensler stressed the need for a regulatory framework for crypto platforms for their own survival. He explained that crypto assets should be under the same public policy imperatives to protect investors and fight illicit financial activities.
He said that the global market capitalization for cryptocurrencies has already surpassed $2 trillion and, if crypto is “going to have any relevance five and 10 years from now, it’s going to be within a public policy framework,” adding:
“History just tells you, it doesn’t last long outside. Finance is about trust, ultimately.”
Echoing his earlier suggestion for crypto trading platforms to register with the SEC, he said, “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.”
Gensler argued that the lack of traditional brokers makes crypto and decentralized finance (DeFi) platforms a challenge for regulators because it’s unclear to whom the law applies in the DeFi ecosystem. Calling DeFi a variation of the peer-to-peer lending businesses, he argued that those platforms have “a fair amount of centralization” with governance mechanisms, fee models and incentive systems:
“It’s a misnomer to say they are just software they put out in the web. But they are not as centralized as the New York Stock Exchange. It’s sort of an interesting thing that is in between.”
Since his appointment in April, the new SEC chair has repeatedly called for robust regulations for the crypto ecosystem. On the other hand, some crypto leaders argue that stricter regulations would not necessarily help to prevent fraud.