The U.S. Securities and Exchange Commission (SEC) is facing pressure to tighten regulations on cryptocurrencies.
- Fraud and illegally conducted finance are making crypto securities the target of the White House’s scrutiny.
- The White House released its first-ever “Comprehensive Framework for Responsible Development of Digital Assets” on Friday—detailing reports from several government agencies that show the dangers of illicit crypto uses.
- “[Digital Assets] pose real risks as evidenced by recent events in crypto markets. The May crash of a so-called stablecoin and the subsequent wave of insolvencies wiped out over $600 billion of investor and consumer funds,” says the White House.
- The chair of the SEC has repeatedly gone on the record stating that its policies are adequate to address ongoing issues within crypto markets.
Why it’s important
The White House is worried about consumer protections for Crypto investors, having found evidence that fraud, scams, and theft had left a 600% increase in monetary losses from 2020 to 2021.
“[The reports we’ve seen] call for measures to mitigate the downside risks, like increased enforcement of existing laws and the creation of commonsense efficiency standards for cryptocurrency mining,” says The White House.
“Sellers commonly mislead consumers about digital assets’ features and expected returns, and non-compliance with applicable laws and regulations remains widespread. One study found that almost a quarter of digital coin offerings had disclosure or transparency problems—like plagiarized documents or false promises of guaranteed returns.”
The White House’s framework hopes to establish a safer market and to encourage the SEC to push harder against unlawful or abusive practices.
The chair of the SEC doesn’t agree. Testifying before Congress on Thursday, Gary Gensler laid out the current state of Crypto securities and the rules already on the books specifically directed toward Crypto.
“[Gensler] defended his agency’s stance on regulating crypto tokens, arguing that nearly all crypto offerings available today fit the definition of a traditional security and should be registered and regulated accordingly,” says Barron’s.
“The core principles from the securities laws apply to all corners of the securities markets… Let’s ensure that we don’t inadvertently undermine securities laws underlying $100 trillion capital markets. The securities laws have made our capital markets the envy of the world,” says Gensler.
“The cryptocurrency industry has gotten big, but it remains volatile. The combined market capitalization of all cryptocurrencies fell from $2.8 trillion in November to less than $1 trillion today. Much of that loss was born by normal people, many of whom were overextended as they made risky bets on a financial future that has not yet—and might never—arrive,” says Axios.