The chair of the Securities and Exchange Commission, Gary Gensler, has repeatedly warned that cryptocurrencies must be regulated to protect investors. On Thursday he took a big step toward that goal, saying he will work with Congress to help create legislation that would increase crypto oversight.
Mr. Gensler doubled down on the need for regulation, saying crypto start-ups wouldn’t prosper without it. “Detroit would not have taken off without some traffic lights and cops on the beat,” he said.
His speech immediately prompted outcry from the crypto community, which sees great potential in digital currencies precisely because they are decentralized.
“Crypto is a novel & unique technology: how it should be regulated is a major question for Congress (not the SEC Chair) to decide,” tweeted Jake Chervinsky, the head of policy at the Blockchain Association, a trade group.
The push comes as crypto’s biggest players seek to consolidate their dominance. This month, Binance, the world’s largest cryptocurrency exchange, will unilaterally convert some stablecoins that were issued to its customers by other companies into Binance-branded tokens. This is the kind of move that has lawmakers rushing to draft legislation for stablecoins, or cryptocurrencies ostensibly pegged to the value of a stable asset, like the dollar.
Under Binance’s conversion plan, a group of popular dollar stablecoins — which are primarily used to settle trades in the volatile digital asset space — will automatically convert to its BUSD brand. Stablecoins boomed last year and now account for about 15 percent, or $150 billion, of the crypto market’s total capitalization.
These assets, Mr. Gensler said on Thursday, “have features similar to, and potentially competing with, money market funds, other securities and bank deposits,” and raise important policy issues. Recalling a report from regulators on the risks that come with stablecoins, he called for more restrictions.
Some crypto industry figures have stepped up their lobbying efforts amid a burst of legislative efforts in Congress. The House Financial Services Committee is working on a bipartisan stablecoin bill, which some industry executives said they would welcome.
“We believe this is beneficial to both exchanges and users,” Patrick Hillman, Binance’s communications chief, told DealBook.