• Gensler said investors are not well protected
• Investors do not get disclosures when they invest in digital asset
Investors need more protection in “the highly speculative” crypto-asset market, or they could lose trust, US Securities and Exchange Commission Chair Gary Gensler said on Monday.
“We have this basic bargain: You, the investing public, can make your choices about the risk you take, but there is supposed to be full and fair disclosure, and people are not supposed to lie to you,” Gensler said at the Financial Industry Regulatory Authority’s (FINRA) annual conference in Washington.
Generally, unlike other assets, investors do not get disclosures when they invest in digital assets. For other regulated asset classes, investors can choose what risks they want to take, he said.
However, investors do not know whether the trading platform they are using is actually trading against them or whether they own the assets they store in digital wallets for the crypto asset class.
“There’s supposed to be full and fair disclosure, and people aren’t supposed to lie to you. Right now, many of these entrepreneurs come up with an idea … and they want to raise money from you. That puts it inside of the securities laws,” Gensler mentioned.
The comments came after last week’s collapse of TerraUSD, a so-called stablecoin that lost its 1-to-1 dollar peg and fell below 30 cents, sending other cryptocurrencies tumbling, with Bitcoin plummeting to trade under $30,000, far below its November 10 record of $69,000.
While crypto markets are thought of as decentralized, the reality is that most activity occurs on a handful of trading platforms, which, along with token issuers, need to work with the SEC to improve industry rules and disclosures, Gensler said.
Gensler said that the SEC would continue to be “a cop on the beat” while working with the Commodity Futures Trading Commission to ensure all cryptocurrencies are covered.
“There’s a lot to be done here, and in the meantime, the investing public is not that well protected,” he said.
Picture Credit: NBC News
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