Regulatory pressure on crypto-backed trading platforms is intensifying in the United States. The Securities and Exchange Commission (SEC) in the United States wants cryptocurrency exchange platforms to register with them.
The SEC claims that cryptocurrency platforms are providing security alternatives for crypto assets, which they are not permitted to do unless they are registered with them.
The SEC's stand
Gary Gensler, the head of the Securities and Exchange Commission, recently addressed at a conference, requesting increased authority from the US Congress to compel platforms to follow the SEC's rules.
Gesler highlighted out that cryptocurrencies are frequently simply decentralised in name, with goods such as securities. Many millions of people could lose their money if these unregistered securities cause price changes, which are common as a result of market manipulation.
"In certain instances, this asset class is plagued with fraud, frauds, and misuse," Gensler stated. "We need more Congressional authority to keep transactions, goods, and platforms from falling through the cracks in the regulatory system." "I'm concerned that if we don't solve these issues, a lot of people will be harmed," he continued.
On Tuesday, Gensler testified before the Senate Banking Committee, repeating some of the same issues and calling for stronger regulation of cryptocurrency exchanges. While many platforms maintain that their services and products are not securities, Gensler claims that "quite many are."
Gensler also used Coinbase as an example, claiming that the exchange "may have dozens of tokens that are securities" despite the fact that "they are not securities."
Despite his criticism of the crypto industry, Gensler stated that he was not opposed to the new technology. "I am concerned that if the field, which I studied for 3.5 years at MIT, remains outside of the public policy framework for Anti-Money Laundering (AML), investor protection, and tax fraud... it will not survive," he stated.
The crypto response
Coinbase and other cryptocurrency exchanges argue that their products aren't securities and hence don't need to be registered with the SEC. Platforms frequently seek to service lending and products in order to increase margins. Platforms, on the other hand, are willing to collaborate with the SEC. The major point of disagreement between regulators and service providers continues to be the scope of product descriptions supplied by crypto platforms.
Coinbase recently announced that the Securities and Exchange Commission (SEC) had threatened to sue the business if it introduced its new lending product, Lend. Coinbase, which is known for working closely with regulators, protested that the SEC failed to explain how or why it deemed its new product a security asset, despite the fact that the new product failed to pass the Howey test. The US Supreme Court created the Howey test to examine whether something was financially secure or not.
As regulatory pressure on cryptocurrency platforms grows in the United States, countries such as El Salvador and Ukraine are gradually opening up to greater acceptance.