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The chairman of the U.S. Securities and Exchange Commission (SEC) says the crypto industry will have to embrace new regulations to stay relevant and survive.
Gary Gensler tells the Financial Times that like other forms of assets, cryptocurrencies should conform with public policies to protect investors, prevent illegal activities and maintain financial stability.
“At about $2 trillion of value worldwide, it’s at the level and the nature that if it’s going to have any relevance five and 10 years from now, it’s going to be within a public policy framework.
History just tells you, it doesn’t last long outside. Finance is about trust, ultimately.”
The former blockchain professor at the Massachusetts Institute of Technology (MIT) says he is disappointed with how crypto trading platforms responded to his suggestion that they should register with the SEC on the grounds that many digital assets qualify as securities.
Gensler says that 95% of crypto activities take place on trading platforms, but investor protection in these venues is “really sparse.”
He adds that many crypto platforms pose an additional challenge to regulators because their decentralized nature allows them to operate without traditional brokers that easily comply with the laws.
Gensler’s comment comes as Congress works on a $1 trillion infrastructure bill that includes a controversial clause that would expand the meaning of “broker” in the tax code to “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”
Crypto proponents are concerned the language in the bill would place impossible demands on software developers, cryptocurrency miners, digital wallet creators and other entities who, due to the nature of blockchain technology, are fundamentally unable to identify their users.