Friday 03 December 2021 10:28 am | Updated: Friday 03 December 2021 10:39 am

Volume being turned up on cryptocurrency regulation talk

The new boss of Wall Street’s top financial regulator is ramping up the rhetoric that regulation of US-based crypto exchanges is coming.

Speaking at The Digital Asset Compliance & Market Integrity Summit on Wednesday, the Chairman of The Securities and Exchange Commission (SEC), Gary Gensler, discussed the increasing importance for cryptocurrency trading platforms to register with the SEC so the agency could offer better investor protection and monitoring.

He noted: “Platforms, whether they’re trading platforms, lending platforms, whether they call themselves centralised or they call themselves decentralised… are an important place for public policy and investor protection.”

Gensler added that, should the watchdog and trading platforms be unable to come to an understanding, “we’re going to use the enforcement tool”, taking legal action against those firms that fail to register. “But I think a better approach for these platforms…is to work to get registered within the law,” he affirmed.

The forthcoming stricter stance by the SEC is something I, and many others, have been expecting. Indeed, I’ve long thought it was nothing but inevitable.
There are three key takeaways from this, in my view.

First, many of the exchanges in the US will be launching a fightback, as their worries about increasing levels of regulation and taxation move to become reality.

It’s also my belief that with all that extra reporting, which is onerous and costly, some entities will simply choose to be based in another jurisdiction, away from what they perceive as the over-reach of the US authorities.

Meaning Gensler’s tactics could have a raft of unintended consequences – namely encouraging crypto exchanges to move offshore from America.
Second, despite some within the industry causing an uproar, the SEC will prove to be on the right side of history when it comes to regulation.

There’s sustained interest in and demand for cryptocurrencies, so what’s needed is a strong regulatory framework to be established and approved at an international level.

This will help protect investors, make the sector itself more robust, tackle cryptocurrency criminality, and reduce the potential possibility of disrupting global financial stability, as well as offering a potential long-term economic boost to those countries which introduce it.

And third, the SEC’s actions are underscoring how cryptocurrencies are now a part of the mainstream financial system. But also more than that. By bringing in legislation from scratch it suggests that the regulator might be hinting that it too believes that crypto is the future of money.