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SEC Chair Gensler: Crypto Industry Plagued by Misconduct and Legal Challenges

Gary Gensler, the SEC Chair, has reiterated his reservations about the widespread regulatory non-compliance and improper conduct prevalent within the cryptocurrency sector.

Speaking at a conference organized by Better Markets, Gensler conceded that it’s not feasible to generalize all tokens. However, he pointed out that a substantial segment of the crypto realm is subject to securities regulations, yet a considerable portion doesn’t adhere to these laws.

“Much of the crypto domain, without making assumptions about any specific token, is regulated by securities laws. However, it’s concerning to see that a significant part of it is not in compliance,” Gensler expressed.

He further contended that the ramifications of the crypto sector have been largely detrimental, with countless investors incurring substantial losses. Gensler underscored the potential of these challenges not only plaguing the crypto ecosystem but also permeating and destabilizing the wider financial framework.

Gary Gensler, the SEC Chair, highlighted the vulnerabilities and potential hazards that the cryptocurrency sector presents.

“Countless investors have suffered in this domain,” he stated.

He cautioned that while individual investors could face setbacks, there’s also a broader risk to the entire economy. “Such activities can jeopardize not just investors but also the wider economy. This is because they can dent investor trust, and the foundation of finance is essentially trust.”

Gensler accentuated the pivotal role of investor confidence in the realm of finance. He argued that the very essence of finance is trust. If that trust dwindles, it can ripple outwards, causing extensive disruptions.

While he did acknowledge that in terms of scale, the crypto economy is modest, especially when juxtaposed against the gargantuan multi-trillion-dollar capital market, he accentuated that its potential to impair investor confidence should not be underestimated.

Drawing on recent events, Gensler alluded to tangible links between the failures of certain regional banks earlier in the year and their engagements in the cryptocurrency sector.

Gensler Says Crypto Misconduct is Massive

Gary Gensler expressed deep reservations about the widespread malpractices prevalent within the cryptocurrency sector, highlighting an unparalleled level of noncompliance.

“In my experience, I’ve never encountered a sector as saturated with misconduct, with individuals actively seeking to operate beyond the legal parameters,” he remarked.

Furthermore, he took issue with celebrity endorsements in the crypto space, implying they might mislead or unduly influence potential investors. He also expressed disdain for attempts to exploit regulatory differences across various jurisdictions, commonly termed as ‘regulatory arbitrage’.

Yet, Gensler was consistent in his belief that the introduction of new regulations or legislations is redundant. According to him, the current statutes instituted by Congress are sufficiently comprehensive to address these challenges.

He specifically pinpointed the existing legal frameworks related to anti-money laundering, sanctions, securities, and commodities exchange as being applicable and pertinent to the crypto industry.

During the conference, Gensler chose not to directly address a comment from the moderator about “sympathetic judges” in relation to recent legal decisions.

In a significant ruling last month, the US Court of Appeals for the District of Columbia Circuit sided with Grayscale. The court mandated the SEC to retract its prior denial of Grayscale’s application and recommence the evaluation process. Central to the court’s ruling was the perception of inconsistency. The court questioned the rationale behind the SEC’s approval of Bitcoin futures-based ETFs while rejecting spot Bitcoin ETFs.

In another distinct legal case, Ripple gained favor in a US court against an ongoing lawsuit initiated by the SEC. The court asserted that merely selling XRP on trading platforms doesn’t inherently qualify as an investment contract.

Just this week, Gensler presented his perspective to the Senate Banking Committee, reemphasizing his belief that a large segment of cryptocurrencies should be incorporated within the regulatory framework of the agency.

Drawing on history to illustrate his point, he remarked, “We’ve seen this narrative unfold in the past. The current crypto scenario echoes the 1920s’ landscape before the establishment of federal securities regulations.”

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I want to save money. Will cryptocurrency work?

Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

Every cryptocurrency has two main components: the units of digital exchange called “coins” and the network within which the exchange takes place. These units can be transferred between wallets and exchanged on exchanges. The networks in which these coins exist are called blockchains, which translates to “chains of blocks.”

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