• Stablecoins, according to Gary Gensler, are like teenagers

  • Gary Gensler, chairman of the Securities and Exchange Commission, defended his stance on cryptocurrencies at the annual meeting of the Securities Industry and Financial Markets Association, addressing the need for stablecoin regulation.

    During an interview at the meeting, Gensler discussed the decisions he and other regulators have made regarding the regulation of the cryptocurrency industry in the United States.

    “A lot of investors are looking for yield… However, these platforms have not yet been approved by the Commodity Futures Trading Commission or the Securities and Exchange Commission to be part of an investor protection framework. And without that, you don’t have market integrity, efficiency in competition, or, to put it bluntly, resilience.” According to Gensler.

    Gensler also mentioned the President’s Working Group on Financial Markets’ recommendations on regulating stablecoins, which were released on Monday. According to the report, stablecoins should be issued, insured, and regulated by banks regulated by the US government. Gensler had previously hinted at future regulation of stablecoins, noting in September that a stablecoin could be considered a security and thus required SEC regulation.

    Following the Treasury report on stablecoins, Gensler compared the currency to a teenager, noting that he believes the currency will not reach “adulthood” without regulatory oversight such as money laundering regulations and tax compliance.

    Prior to Gensler’s remarks, the government issued a report that stated:

    “…a consistent and comprehensive regulatory framework is required to increase transparency into key aspects of stablecoin arrangements as well as to ensure that stablecoins function in both normal and stressed market conditions.”

    Stablecoins have grown rapidly since their inception, with the largest stablecoin issuers’ current market capitalization exceeding $127 billion, according to the Treasury report. This represents a 500 percent increase over the previous twelve months.

    Gensler recently told the House Financial Services Committee that the SEC had no plans to ban cryptocurrency, and he also elaborated on his thoughts on stablecoins:

    “Right now, the $125 billion in stablecoins we have are like poker chips in a casino,” Gensler said. “I do believe that if this continues to grow – and it has more than tenfold in the last year – it can pose those systemic wide risks.”

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