- SEC chairman Gary Gensler addressed the risks DeFi is raising for crypto investors.
- The chairman called for the SEC and the CFTC to provide a regulatory framework for exchanges.
The US Securities and Exchange Commission (SEC) has said that decentralized finance (DeFi) poses various risks to crypto investors. SEC chairman Gary Gensler talked about the challenges of DeFi while speaking before the House Appropriations Committee on the 26th of May. Gensler mentioned his concern about the high volatility across the crypto market.
SEC addresses challenges for crypto investors
According to the “Testimony Before the Subcommittee on Financial Services and General Government, US House Appropriations Committee,” the SEC chairman said that crypto lending platforms and DeFi raise challenges for investors.
Although Gensler noted that the crypto market had surged significantly over the last five years, he added that the crypto market valuation had also declined greatly in the last 12 days. As of the 24th of May, the total market valuation for all cryptocurrencies was $1.6 trillion. On the same day, the chair said that 80 tokens had a market cap of $1 billion, and about 1,600 had a market value of over $1 million.
In contrast, the total crypto market was about $9 billion as of the 26th of May, 2016. This shows that cryptocurrency has seen significant expansion within five years.
In addition, Gensler pointed to the increased trading volume of cryptocurrencies. He said that daily trading volume jumped from $130 billion to $330 billion. However, the SEC chairman said that regulatory authorities do not have a record of the figures as transactions occurred on unregistered crypto exchanges. He added that token trading on unregistered exchanges is one of the “regulatory gaps” in the crypto space.
Addressing the various challenges countering investors’ protection, the SEC chairman explained that tokens on the market could be sold, traded, or offered against the federal securities laws. He said that none of the exchanges trading cryptocurrencies has registered as an exchange with the SEC. He continued:
Altogether, this has led to substantially less investor protection than in our opportunities for fraud and manipulation. The Commission has prioritized token-related cases involving fraud or other significant harm to investors.
Gensler continuously speaks on crypto regulations
The SEC chairman has always advocated for crypto investor protection. Previously, Gensler said it is necessary for the agency to provide a regulatory framework for crypto exchanges. He mentioned that neither the SEC nor the Commodity Futures Trading Commission (CFTC) has laid down regulations to guide exchanges. As a result, Gensler said investors lack protection from fraud and manipulation.
Gensler’s comment on crypto and regulations came in response to Rep. Patrick McHenry (R-N.C.), who asked about digital assets.
In conclusion, the SEC chairman said that he looks forward to working with fellow regulators and Congress to attend to investors’ challenges in the crypto markets.
Amid the ongoing freefall in the crypto market, Bitcoin currently stands at a market cap of $733,550. At press time, the number one crypto asset by market cap is trading around $39,000. According to data provided by Crypto News Flash, the major cryptocurrencies are gradually recovering from recent losses.