SEC Leader Gary Gensler: Crypto Lenders Offered “Too Good to Be True” Return
by Arthur · July 14, 2022
The chairman of the Securities and Exchange Commission, Gary Gensler, called on lending companies for cryptocurrencies to offer unrealistic returns today. interview with Yahoo Finance.
“If it’s too good to be true, then maybe it is,” said Gensler, referring to the return on crypto deposits from 4% to 20% offered by a number of companies and marketed to investors as safe. “There can be a lot of risk inherent in that.”
His comments come amid a market crash in crypto that has sent several lending platforms petitioning for bankruptcy, including Voyager Digital and recently Celsius network. Despite pausing customer withdrawals, Celsius’s website states that customers can earn an annual return of up to 18% on deposits for certain cryptocurrencies and Voyager provides a 12% reward on deposits for a relatively unknown token called KAVA, according to their website.
Both sites also offer high returns on stablecoins deposits, which are digital assets that often try to link the price to the value of a fiat currency – such as the US dollar – and Gensler also pointed out the risks associated with them.
Gensler claimed the main use of stable coins is like a settlement tool in DeFi, a collective term that describes financial tools that enable loans, lending and trading in cryptocurrencies without third-party intermediaries. Gensler compared these digital assets to “poker chips” that must be regulated as part of an ecosystem that lacks investor protection and is subject to fraud and manipulation.
“The public benefits from knowing full and fair disclosure and that someone is not lying to them,” Gensler said. “You get to decide what risk you want to take, but the person who provides the money and the person who sells you these financial assets should not cheat you, should give you the information so you can make your decisions.”
The SEC has rules in place when it comes to deciding what constitutes an investment company, and Gensler referred to the agency’s review of cryptocurrency lender BlockFi earlier this year, where the SEC found the company to be an incompatible, unregistered investment company.
In February, BlockFi entered into a $ 100 million settlement with the SEC and government regulators to offer high interest rates on cryptocurrency deposits. The company found itself in trouble for providing a lack of public information to investors, Gensler said, adding: “There is a way forward for these lending companies.”
Stock exchanges, lending institutions and broker-dealers are the three main groups of companies that the SEC will continue to have talks with regarding SEC compliance in the coming months, Gensler explained, pointing out that the agency is also looking at a number of cryptocurrencies and stable currencies.
To confirm what he has said previously, Gensler noted that the SEC will need to work with the Commodity Futures Trading Commission (CFTC) and banking regulators to cover the full range of cryptocurrencies, noting as an example that Bitcoin is not considered a security by the SEC and must regulated as a commodity under the CFTC.
Do you want to become a crypto expert? Get the best from Decrypt right to your inbox.
Get the biggest crypto news + weekly summaries and more!
