In an interview at the Bloomberg Invest Summit 2024, Gary Gensler, the Chairman of the US Securities and Exchange Commission (SEC), outlined his stance on crypto regulation.

He noted that many entities within the crypto space do not adhere to these laws. This poses significant risks to investors and the broader financial system.

SEC’s Gary Gensler Highlights ‘False Decentralization’ in Crypto Platforms

Gensler emphasized the need for strict adherence to existing US securities law, the Securities Act of 1933, within the crypto industry. According to him, the securities laws are designed to safeguard investors and maintain fair, orderly, and efficient markets.

“And we have a set of rules that are pretty clear. There’s nothing inconsistent about crypto securities and the securities laws,” he stated.

Read more: Who Is Gary Gensler? Everything To Know About the SEC Chairman

Gensler highlighted compliance issues within the crypto industry. He noted that many tokens and platforms fail to adhere to securities laws, thereby not providing necessary disclosures to investors. He sees this lack of compliance poses risks to the public.

Furthermore, he emphasized that moving operations abroad does not excuse crypto companies from following US securities laws. Gensler stressed the importance of proper disclosure and compliance regardless of location.

“If they’re really telling the truth about it, and they’re making the disclosures and properly registered, and then if the intermediaries are operating within the law without the conflicts,” he said.

Additionally, Gensler pointed out the false decentralization of many platforms. He opines these platforms are actually highly centralized and operate with conflicts of interest.

“The law doesn’t allow you to be trading against your customers and operating a so-called exchange, and trading in front, and possibly also taking investments in an investment contract or security, and then listing and getting the listing pop,” he outlined.

Gensler’s stance on implementing securities law in the crypto industry is intriguing, especially considering the calls from prominent figures in the industry for regulatory clarity. For example, in May, Charles Hoskinson, the co-founder of Ethereum (ETH) and Cardano (ADA), described the idea of regulating crypto under current securities law as “absurd.” Hoskinson’s comments reflect a broader industry discussion regarding the suitability of existing securities laws for cryptocurrency characteristics.

“Cryptocurrencies can be commodities, securities, currencies, loyalty points, non-fungible tokens. All at the same time. So, how do you do these asset regulations when things can move on daily, weekly, monthly basis? In fact, circumstances can change over time,” Hoskinson explained.

During the interview, Gensler also clarified the SEC’s stance on crypto exchange-traded funds (ETFs). The approval of spot exchange-traded products is a more recent development. These products provide the investing public with regulated options for crypto investment, contrasting with non-compliant platforms where most crypto trading occurs.

Read more: Crypto Regulation: What Are the Benefits and Drawbacks?

Additionally, he discussed the approval of spot Ethereum ETFs. Gensler emphasized that the approval process involves rigorous scrutiny to ensure they comply with all regulatory requirements, providing a safer investment option for the public.

“I don’t know the timing, but it’s going smoothly, and it’s really about the asset managers making the full disclosure so that those registration statements can go effective and those lawyers know what that is,” he said.