The SEC Chair, Gary Gensler, has said that any crypto platform or product, that promises returns to the trader or the investor, should come under regulatory oversight.
He thought that the many crypto platforms that collect funds from investors and invest them directly or indirectly into crypto should first make themselves familiar with the laws and regulations surrounding such products and then get themselves registered and licensed with the SEC sooner than later. He also added that it is likely that those platforms that promise returns to investors might end up losing the funds and in those circumstances, the investors would need adequate protection and adequate measures put in place to ensure that the platform operates in the way that it has promised, to the investors.
“This crypto space is now certain of a size that without those investor protections of banking, insurance, securities laws [and] market oversight, I do think somebody is going to get hurt,” Gensler said. “A lot of people are likely to get hurt.”
This is probably one of the reasons why the SEC had stopped the crypto exchange Coinbase from launching its crypto Lend product a few weeks back and had also threatened them with legal action if they went ahead. The agency might have felt that the product needs to be vetted and approved before it can be launched to the public through Coinbase did not let it go very easily but had to ultimately buckle down to the pressure. This is also the base of the battle between the SEC and Ripple as the SEC believes that such cryptos and their related products should be classified as securities and hence subject to strong scrutiny as well as approval by the SEC while Ripple believes that XRP isn’t security to come under the purview of the SEC.
Crypto and its related products are still a growing field globally and the regulators are also racing against time to keep up with the various technological changes and challenges. So, it is only natural that this kind of friction and confusion in the understanding of how each product should work and whether that fits in with the existing regulations and laws and provides a level playing field is something that needs to be decided on a case by case basis.