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DeFi regulation: SEC chairman Gensler voices concerns

TL;DR

TL;DR Breakdown

  • Gensler voices concern over DeFi regulation
  • United States SEC is thinking about regulating stablecoins

The emergence of the decentralized finance sector of the crypto ecosystem has been one remarkable win for the crypto community. Though rewarding, the sector has been one to watch out for in terms of scams and hacks. This has pushed significant figures in the crypto sector to float the idea of DeFi regulation.

One such person who has recently voiced concerns is the chairman of the United States Securities and Exchange Commission, Gary Gensler. According to Gensler, the emergence of the sector is a big win for the crypto industry. He believes that even at that, the sector should not evade the necessary regulations.

Gensler touts DeFi regulation at Yahoo Finance summit

Gensler gave this statement at the All Markets Summit Organized by Yahoo Finance. He positioned that even though Bitcoin is now pressing up against fiat currencies, the DeFi sector is trying to defy other innovations. He noted that even though it is remarkable, it mirrors the debut of the peer-to-peer lending system. Gensler pointed out that when the system first came into the financial sector, regulators spent about four or five years before it was regulated. Finally, he said that the DeFi sector shows the same signs the peer-to-peer system showed some years back.

The decentralized finance sector houses a network of protocols that offer users different ways to earn rewards. The protocols in the sector offer services such as yield farming, lending, crypto derivatives, among other products. One main characteristic of the DeFi sector is that users can carry out their transactions without third parties such as financial institutions or banks. With Gensler’s concerns, he still hopes that the innovation attains financial stability and protection of investors in the space.

He mentioned that traders are now in the decentralized finance space to carry all types of activities which could end badly for them without proper DeFi regulation. However, this is not the first time Gensler has taken a swipe at the decentralized finance sector. During the summer, Gensler mentioned that they are probably many securities in the DeFi sector that are not registered, hence the idea of DeFi regulation. He further went ahead to say that the name does not suit the sector, branding it a misnomer.

The US SEC is looking to regulate stablecoins

One of the most exciting aspects of decentralized finance is Stablecoin. Stablecoins are digital assets backed by fiat currencies on a 1:1 ratio. Most times, they are backed by either the euro or the United States dollar. After a question on the possible regulation of stablecoins, Gensler made it known that the United States SEC is presently looking into the possibility of regulating it. He noted that the entire stablecoin in the market is about $130 billion, which represents more than ten times what it was last year.

Also, he pointed out that most of the stablecoins are presently in crypto exchanges, lending platforms, making up about 80% of their volume. Gensler feels that such an amount of stablecoin in the market raises concerns for speculative activity, and regulations must cover it. Finally, he said that aside from the DeFi regulation, he feels that they have a lot of work to do regarding the stablecoins.

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Owotunse Adebayo

Adebayo loves to keep tab of exciting projects in the blockchain space. He is a seasoned writer who has written tons of articles about cryptocurrencies and blockchain.

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