SEC chief says the cryptocurrency market is centralised

Contrary to popular belief, the cryptocurrency market is not characterised by decentralisation. This follows from comments by the head of the SEC Gary Gensler, The Block writes The Block.

“Intermediaries profit from scale, network effects and access to valuable data. While technological innovations continually disrupt existing business models, centralisation nonetheless tends to re-emerge. It is present in the crypto market as well, where there is a significant concentration of intermediaries,” he explained.

The SEC chief warned that vigilance is needed regarding areas where centralisation and potential economic rents have grown or could grow in the future.

Gensler acknowledged that most crypto exchanges violate securities law by listing unregistered investment contracts.

“They typically have hundreds of tokens. That is more than enough to indicate that some of them are securities,” he explained.

The SEC chief urged Bitcoin exchanges to approach the agency on whether a given asset should be recognised as an investment contract. He added that the Commission is prepared to work on a case-by-case basis regarding the possibility of exempting a given token.

Gensler urged Congress to drop legislation that “undermines the competitiveness of the stock markets or fixed-income markets.” This could be achieved by changing the terminology surrounding the activities of brokers or exchanges, to adapt to a new class of financial assets.

The SEC chief emphasised the need for even-handed treatment of market participants. This would allow focus on “price competition, service and other key factors” rather than market manipulation.

Earlier, Gensler announced the development of ways to register digital assets as investment contracts and stepped up efforts to authorise crypto platforms. In May, the official warned of possible prosecution of unregistered Bitcoin exchanges.

In July, a group of senators introduced the Digital Commodities Consumer Protection Act. It would require firms offering trading of digital assets to register with the CFTC.

Later, Gensler supported expanding the CFTC’s mandate in the industry.

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