TL;DR Breakdown
- Garry Gensler proposes regulating crypto exchanges in the US.
- Why regulators ‘may’ want to regulate crypto firms.
The newly appointed chairman of US Security and Exchange Commission (SEC), Gary Gensler, has told the congress (House Financial Services Committee) to consider regulating crypto exchanges in the US.
Gensler explains the move is to protect investors that invest in these exchanges. He emphasizes that crypto exchanges do not have any regulatory framework at the SEC and the CFTC (Commodity Futures Trading Commission), which could instill confidence in investors.
He also said that there are no protections against fraud and manipulation as he convinced congress to act on the situation.
The SEC chair hearing was mainly on the fallout from January’s GameStop short squeeze. It was called “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide.”
During the hearing, Rep. McHenry asked Gensler how his led SEC would bring more regulatory clarity to crypto and blockchain.
Crux between crypto exchanges and regulators
To many, the lack of government interference in crypto operations is a positive thing for the industry. A class of the crypto community best described as the libertarian-leaning Bitcoin-like the lack of guardrails.
However, the missing government oversight functions in the space is part of why the market remains risky.
Both the SEC and CFTC oversee cryptos in some instances. However, with BTC, ETH, and other digital assets not categorized as securities, Crypto exchanges that trade these coins can be independent of the SEC.
However, regulators remain worried about happenings in the space owing to the spate of crime and the prospect of illegalities the industry can harbor.
A recent report from the blockchain analytics firm CipherTrace pointed to an “inevitable” expansion of illicit activity in crypto as space continues to grow. These reasons leave regulators concerned about the space and seek measures to bring crypto exchanges and the entire crypto space into the fold.
