SEC Chair Gary Gensler has highlighted the importance of complying with securities laws in the crypto market in his prepared remarks for an upcoming U.S. Congress hearing. Gensler emphasizes that most crypto tokens are considered securities and argues that calling oneself a DeFi platform is not an excuse to defy securities laws. He stresses that crypto investors should receive the same protection as other investors and points out potential conflicts of interest and risks for investors posed by crypto intermediaries that combine various functions. like exchange, custodial, clearing, and lending.
Noncompliance Endangers Investors and Jeopardizes Public Trust
Gensler notes that noncompliance in the crypto market endangers investors and jeopardizes public trust in capital markets. To address this issue, the SEC has taken action through enforcement and rule proposals. For instance, the best execution rule would cover all securities, including crypto asset securities, while the investment adviser custody rule would be updated to cover all crypto assets and enhance protections provided by qualified custodians.
Supplemental Information Provided for Proposed Amendments
Gensler mentions that the SEC staff has provided their views on public company accounting related to crypto assets and disclosure regarding significant crypto asset market developments. He also notes that the SEC is reopening the comment period and providing supplemental information for proposed amendments to the definition of “exchange” under Exchange Act Rule 3b-16.
Investor Protection is Key
Gensler emphasizes that forsaking investor protection puts real people’s life savings at risk and that regulation aims to protect U.S. investors. He reiterates that Congress has given the SEC a mandate to safeguard investors regardless of the labelling or technologies utilised. Nothing about the crypto markets is incompatible with securities laws, according to Gensler, and the investing public generally purchases crypto tokens in anticipation of profits and a better future, counting on the efforts of others to generate returns on their investment.
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