SEC Chief Says the US Won’t Follow China in Banning Cryptocurrencies

SEC Chief Says the US Won’t Follow China in Banning Cryptocurrencies
A person holds a visual representation of the cryptocurrency Bitcoin, at the "Bitcoin Change" shop in the Israeli city of Tel Aviv on Feb. 6, 2018. (Jack Guez/AFP/Getty Images)
Katabella Roberts

Securities and Exchange Commission (SEC) Chair Gary Gensler told Congress on Tuesday that his agency would not follow China’s lead in implementing a ban on cryptocurrencies.

Speaking before the United States House of Representatives Committee on Financial Services, Gensler was asked by Rep. Ted Budd (R-N.C.), a supporter of cryptocurrencies, whether the SEC would move to prohibit the digital currencies.

“No, that would be up to Congress,” Gensler said, adding: “I am technology-neutral. I think that this technology has been and can continue to be a catalyst for change, but technologies don’t last long if they stay outside of the regulatory framework.”

“I believe that the SEC, working with the CFTC [Commodity Futures Trading Commission] and others, can stand up more robust oversight and investor protection around the field of crypto finance.”

Gensler did express some concern over the crypto market, noting that “right now, large parts of the field of crypto are sitting astride of—not operating within—regulatory frameworks that protect investors and consumers, guard against illicit activity, and ensure for financial stability.”

He also acknowledged that currently there was not enough investor protection with regard to crypto finance, issuance, trading, or lending.

“Frankly, at this time, it’s more like the Wild West or the old world of ‘buyer beware’ that existed before the securities laws were enacted. This asset class is rife with fraud, scams, and abuse in certain applications. We can do better,” Gensler said.

The SEC chair noted that he has asked staff to work with regulators to ensure investor protection and called on Congress for assistance with regard to issues of sales of crypto tokens, crypto trading and lending platforms, and custody of crypto assets.

“With respect to investor protection, we’re working with our sibling agency, the CFTC as our two agencies each have relevant, and in some cases, overlapping jurisdiction in the crypto markets,” Gensler explained.

“With respect to a broader set of policy frameworks, we’re working with not only the CFTC, but also with the Federal Reserve, Department of Treasury, Office of the Comptroller of the Currency, and other members of the President’s Working Group on Financial Markets, on these matters,” he added.

He also said platforms and projects should talk to the SEC, as many of these have dozens or hundreds of tokens on them, and under law, whenever there are securities on trading platforms, they must register with the commission unless they qualify for an exemption.

Gensler’s comments come after China’s central bank last month declared all cryptocurrency-related transactions illegal while vowing to suppress the virtual currency market.

The People’s Bank of China said in a statement, translated by CNBC, that services offering trading, order matching, token issuance, and derivatives for virtual currencies are prohibited. Overseas crypto exchanges providing services in mainland China are also illegal, the PBOC said.

Cryptocurrencies, including Bitcoin and Tether, are among those specifically cited as not being “fiat money” and cannot be circulated, according to the bank’s statement, Bloomberg reported on Friday.
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