- Since his assumption of office, SEC head, Gary Gensler has been vocal in his call for increased regulation of cryptocurrencies.
- While it is easy to misconstrue his stance as being anti-crypto, another angle shows that his position is actually in favor of cryptocurrencies.
- Big money will be comfortable with the knowledge that there is adequate regulation in the industry that will trigger more inflow into the ecosystem.
- The new regime of legislation around cryptocurrencies has irked the community given the tax reporting burden it places on the major players of the game.
The inflow of institutional funds in cryptocurrency markets is a major catalyst for a boisterous market. Nevertheless, big money is cautious and likes to look before making the leap into uncertain waters. The absence of regulation in the cryptocurrency ecosystem is one of the reasons why some investors shirk away from wading into the field.
SEC Chair, Gary Gensler is set to change this by making increased calls for regulation and although some quarters may not be pleased with his stance, it may prove beneficial for the space in the end.
Gensler’s Stance
In February, Gary Gensler was nominated to head of the SEC and on April 17, 2021, he assumed office as the new SEC boss. His appointment was highly anticipated given his experience with cryptocurrencies as he previously taught a blockchain course at MIT.
Upon assuming his new role, he immediately began calling for increased regulation of cryptocurrencies. His recent call was for Congress to expand the powers of the SEC to allow it to efficiently regulate cryptocurrency trading, lending, and other ancillary activities.
He made the call during the Aspen Security Forum and referred to the current terrain as being “more like the wild west.” Gensler’s call for increased regulation is not borne out of spite but to protect investors. He said, “Right now, we just don’t have enough investor protection in crypto.”
Is This Any Good For the Cryptoverse?
Cryptocurrencies have always had an uncanny relationship with regulations, often viewing them with a lot of skepticism. This is because of the historical antecedents of regulations stifling the growth of cryptocurrencies.
It is easy to categorize Gary Gensler’s call for increased regulation as being inimical to the advancements of cryptocurrencies. However, another angle reveals that Gensler’s intentions are pure.
Big money from institutional investors or state-level investors is only possible within a healthy regulatory framework that is geared at protecting their interests. With regulatory levers in place, institutions will be willing to inject large funds into the markets. This will have the effect of increasing the market capitalization of cryptocurrencies leading to a win-win situation for all parties.
On The Flipside
- Cryptocurrency regulations have led to the loss of revenue and business of several cryptocurrency companies.
- Due to tightening regulations the leading cryptocurrency exchange, Binance, has announced the closing of its operation in Ontario amid stiff challenges from financial regulators around the world
Infrastructure Bill Causes Concerns
The proposed Infrastructure Investment and Jobs Act has left a bad taste for cryptocurrency enthusiasts given the tax requirement burden that it places on cryptocurrency startups.
The Bill’s definition of the term ‘broker’ is wide enough that it can be construed as encapsulating miners, software developers, and other technicians in cryptocurrencies.
The nature of the bill has elicited an outcry from cryptocurrency-affiliated entities as they may be subject to the tax provisions. The proposed legislation would potentially lead to crypto firms being required to increase surveillance on their users which runs contrary to their scope and principles.
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