Securities and Exchange Commission Chairman Gary Gensler reiterated his call for cryptocurrency exchanges to register with the agency, warning that they will be hit with enforcement actions if they fail to do so, during an interview with Washington Post Live Tuesday.
“There are trading platforms where you can buy and sell these [digital tokens], lending platforms where you can earn a return on these tokens….and it’s highly likely that they have on these platforms securities” that the SEC is legally obligated to regulate, Gensler said.
He added that the agency would continue to bring enforcement cases against crypto exchanges that refuse to register with the regulator, but that he fears a lack of oversight will ultimately hurt U.S. investors. “I do really fear…there’s going to be a problem with lending platforms or trading platforms, and frankly, when that happens, a lot of people are going to get hurt.”
Gensler also weighed in on the debate over the regulation of stablecoins, or a type of digital currency that attempts to maintain a value peg to the U.S. dollar DXY, -0.07%. These instruments, including Tether USDTUSD, +0.05% and USD Coin USDCUSD, -0.01%, facilitate trading between popular cryptocurrencies like bitcoin BTCUSD, +5.52% and ether ETHUSD, +8.48%.
In July, Treasury Secretary Janet Yellen convened the President’s Working Group on Financial Markets to address the threat posed by stablecoins to financial stability, emphasizing “the need to act quickly to ensure there is an appropriate regulatory framework in place.”
Gensler compared stablecoins to the private banknotes that dominated the U.S. economy in the mid-19th century, prior to the creation of a national banking system during the Civil War. The so-called “wildcat” banking era “had a lot of problems and costs,” Gensler said, that ultimately necessitated the creation of the Federal Reserve and the public money it provides Americans today.
“Public money has a certain place around the globe,” Gensler said. “Private monies usually don’t last long, so I don’t think there’s a long-term viability for 5 or 6,000 private forms of money. History tells us otherwise.”
Gensler called on Congress to work with the nation’s financial regulators to craft an appropriate regulatory regime for stablecoins. The Treasury Department is expected to issue a report with recommendations concerning stablecoin regulation in the coming weeks.