Regulator says history of ‘wildcat banking’ in US shows limited viability for private forms of money
Securities and Exchange Commission Chairman Gary Gensler said on Tuesday that he does not see very long-term viability for cryptocurrencies, underscoring the importance of protecting investors in the market and bringing it under regulatory oversight.
The Sec Chair Warns That The Cryptocurrency Industry Will Not Reach The Potential Status Outside Our Laws
Mr Gensler compared the thousands of cryptocurrencies in existence to the so-called wildcat banking era, which lasted from 1837 to 1863 in the US in the absence of federal bank regulation. Before President Abraham Lincoln created the office of the Comptroller of the Currency, banks issued their own currencies, which they sometimes refused to redeem for their perceived value in gold or silver.
“I don’t think there’s a long-term viability for five or six thousand private forms of money,” Mr Gensler said at a virtual event hosted by the Washington Post. “So in the meantime I think it’s worth putting an investor-protection mechanism around it.”
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Mr Gensler, who took office in April, previously taught a class on cryptocurrency at the Massachusetts Institute of Technology, raising hopes among some industry participants that he would be a friendly regulator. Instead, he has repeatedly compared the crypto market to the cryptocurrency market. wild west, and urged crypto trading and lending platforms to register with the SEC, saying they may offer unregistered securities in violation of federal law.
On Tuesday he targeted stablecoins, a rapidly growing segment of the crypto market that has attracted Increased scrutiny from regulators in recent months. These tokens, including Tether, USD Coin and Binance USD, are pegged at a one-to-dollar ratio and are said to be backed by high-quality assets. They are mainly used for trading other cryptocurrencies.
“We have a lot of casinos here in the Wild West, and there are these stable coins on the poker chip casino gaming tables,” said Mr. Gensler. He noted that while stablecoins often have aspects of both SEC-regulated investment contracts and banking products, federal bank regulators do not have all the authority they need to oversee.
In separate remarks on Tuesday, Michael Hsu, the acting controller of the currency, said on Tuesday that the crypto industry is on a path that is similar to that of credit derivatives prior to the 2008 financial crisis. He expressed skepticism that cryptocurrency is achieving its goal of promoting financial inclusion and criticized crypto instruments that fail to promise investors stable returns based on how those returns are generated.
“I have closely watched a fool’s gold rush in the lead-up to the 2008 financial crisis,” Mr. Hsu said in remarks to the Blockchain Association, a crypto lobbying group. “It looks like we may be on top of the other with cryptocurrencies and decentralized finance.”
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