SEC’s Gensler Warns Most Cryptocurrencies Will Fail
The Chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, has called crypto a speculative and volatile asset class. Gensler has also warned investors that the majority of cryptocurrencies will fail.
SEC’s Gensler believes most cryptocurrencies will fail
Gensler shared his thoughts about the cryptocurrency market in a Twitter spaces discussion hosted by the US army. He said that cryptocurrencies were “highly speculative” and volatile assets.
The SEC chair also addressed the issue of regulatory compliance in the crypto industry. He said that most crypto assets failed to comply with securities laws. He also called crypto the “Wild West,” adding that most assets did not have actual use cases.
While explaining why the majority of crypto projects would fail, Gensler noted that it was “because venture capital fails, new startups fail, but also because history tells is that there’s not much room for micro currencies, meaning, you know, we have the US dollar and Europe has the euro and the like.”
He has also urged investors to refrain from investing out of the fear of missing out (FOMO). The cryptocurrency market has made a bold uptrend since the beginning of the year, with the market anxious over whether tokens will overcome last year’s losses.
Bitcoin is trading at above $21K, and most tokens are following the trend, with most up by double-digits in the past two weeks.
SEC criticized over lack of crypto regulations
While the SEC chair seems adamant about regulating the crypto space, the commission has failed to develop a clear regulatory framework. The failure of several crypto firms in 2022 has also put the commission under scrutiny.
The fallout of the FTX exchange in November last year led to the crypto community and some US lawmakers questioning the SEC’s failure to develop safeguards that will protect customers. Most of the largest crypto exchanges globally have not registered with the commission despite a growing user base.
The SEC is also being criticized for regulating the market through enforcement. In late 2020, the commission charged Ripple and its executives for an unregistered securities offering. According to the SEC, XRP is a security that should be registered with the commission. While the lawsuit has dragged on for more than two years, the SEC has yet to issue clear guidelines on which tokens qualify as securities and commodities.
The SEC recently filed a similar lawsuit against Gemini and Genesis. The regulatory body said that the Gemini Earn product is a security that was not registered. Around 340,000 Gemini Earn users have been affected by Genesis halting withdrawals on its lending unit. Genesis owes these users around $900 million.
Tyler Winklevoss, the co-founder of Gemini, has criticized the SEC’s charges saying that the commission’s actions were “counterproductive.” Winklevoss also said that Gemini had been in talks with the SEC about the Gemini Earn product for over 17 months, but the commission chose to impose an enforcement action only after Genesis halted withdrawals.
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