According to Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), the emerging decentralized finance (DeFi) industry is one of the most innovative areas in crypto. But that doesn’t mean it can escape regulation. The SEC chairman once again compared DeFi’s rise to the Wild West, emphasizing the need for better investor protection. Speaking at Yahoo Finance’s All Markets Summit on Monday, Gary Gensler explained his thoughts on this altcoin market. we too cryptocoin.com We have compiled the important headlines from the SEC Chairman’s speech for you.
Why is SEC Chairman worried about this altcoin market?
SEC Chairman Gary Gensler says that while Satoshi Nakamoto, the pseudonymous creator of Bitcoin (BTC), emphasized the definition of money, DeFi is starting to push some other innovations. Gary Gensler quotes:
While this is all interesting, it reminds me of when peer to peer credit first emerged about 15 years ago.
According to Gary Gensler, it took about three or five years for regulators to bring peer-to-peer systems to investor protection, and that’s the process he’s currently seeing in DeFi. DeFi is the generic name for a decentralized, unsupervised network of financial protocols focused on lending, yield farming, crypto derivatives and other products. DeFi allows regular users to participate in an expanding financial system without the need for third-party intermediaries such as banks and other financial institutions. While the SEC Chairman’s hope is that innovation will eventually survive, financial stability concerns and public protection are what remains in mind. Gary Gensler expresses his concern:
Too much debt is given. There are too many trades. And without the bodyguards, I fear it will end badly.
Is the aim to include the decentralized system in the regulation of the center?
This isn’t the first time Gary Gensler has targeted the DeFi and altcoin industry. He calls it “a bit of a misnomer”, arguing that DeFi platforms can be full of unregistered securities, while also suggesting that the term DeFi is not correct.
An important part of DeFi is stablecoins, which are cryptocurrencies whose value is pegged 1:1 to fiat currencies like the US dollar or the euro. When asked whether stablecoins should be regulated in the same way as banks, Gary Gensler admits that this is a case in which the SEC is concerned. The SEC Chairman explains:
There are about $130 billion in stablecoins today, which has increased almost tenfold over the past year. Crypto exchanges are intertwined within crypto lending platforms, accounting for 80% of the volume.
According to Gary Gensler, such figures lead to the conclusion that there is too much speculative activity in the market and it is best to bring it to regulatory investor protection. Finally, Gary Gensler adds:
So, I think there is work to be done here.
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