US Senator Elizabeth Warren intends to devote a lot of time and effort to the issue of proper regulation of cryptocurrencies. The day before, she sent a request to the chairman of the US Securities and Exchange Commission (SEC) Gary Gensler, regarding clarification of the role of the financial regulator in the life of the cryptocurrency industry.
As a result, Warren wants to receive a clear answer from the SEC before July 28 about the measures the regulator is taking to protect consumers of crypto exchanges. And this event excited the representatives of the blockchain community, who saw in it a threat to the development of the entire industry.
By tradition, let’s start with an explanation. Senator Elizabeth Warren has criticized cryptocurrency regularly enough – and not for the first time. For example, in the early summer of 2021, she stated that digital blockchain assets are tools of scammers and ransomware. In addition, Warren supported the popular rhetoric today about how harmful to the environment mining Bitcoin and other coins on the Proof-of-Work consensus mechanism.
This topic was raised by Elon Musk and his company Tesla, which refused to accept BTC as payment for their own cars precisely because of environmental concerns.
During all this time, the senator’s position on digital assets has not changed. Moreover, she is ready to create additional risks for cryptocurrency investors, motivating this by taking care of them.
What will happen to the cryptocurrency industry
Warren herself described the crypto industry as “a very opaque and volatile market.” Earlier, the senator had already criticized the crypto, so her appeal to the SEC could be regarded as another wave of hate to Bitcoin. However, Warren in her letter outlined the real problems of digital assets, according to Decrypt.
The first is that crypto exchanges are not regulated by the rules of traditional stock exchanges. Warren believes that stocks and cryptocurrency trading platforms have “quite a lot in common,” so they can be classified under the same category of organizations. The second problem is that the SEC still does not have a clear set of rules for regulating the cryptosphere, which Gensler talked about back in May of this year. Due to the lack of clarity, everyone loses: both government agencies and crypto-exchanges, which have to dodgyly follow norms that are poorly applicable to cryptocurrencies .
In the context of the third issue, Warren noted that crypto exchanges often “fake” their own trading volumes. She cited a May 2019 report from crypto fund manager Bitwise Asset Management that said 95 percent of the transaction volumes displayed by CoinMarketCap were “fake and / or impossible in nature. ” She believes that this is tantamount to manipulating the market, drawing traders and their money into investments that may not be as attractive as they seem.
Finally, the senator may inadvertently welcome decentralized exchanges, noting that their centralized counterparts do not record individual transactions on the blockchain, but can pool traders’ money in pools. With access to individual users’ funds, “they can also use them to inflate fake trade volumes . “
Recall that decentralized exchanges are essentially smart contracts that work regardless of what is happening in the cryptocurrency industry. Accordingly, they cannot go offline due to maintenance work or freeze someone’s wallet. In addition, such platforms do not store clients’ money, since all operations are carried out directly from the wallets of investors, and each of them is actually carried out in the cryptocurrency network, as can be seen using the so-called blockchain explorers. This means that, in fact, decentralized cryptocurrency exchanges are really correcting the shortcomings that Senator Warren spoke about.
To clarify the SEC’s approach to cryptocurrencies, Warren asks the regulator to answer a few questions. Among them, there is a clarification about what powers the SEC has to regulate crypto-exchanges and whether decentralized exchanges belong to this category. Moreover, she wants to know if assets on cryptocurrency exchanges are different from assets on traditional securities exchanges and therefore if they require additional rules to protect consumers.
It looks like the SEC will really be working hard in the near future if the financial regulator wants to provide clarity on the crypto issue once and for all. Now it is more than ever necessary: the cryptosphere is developing at a rapid pace, and due to the elementary lack of protection even for individual investors, every year we deal with fraudulent schemes, hacker attacks and other things that spoil the image of the crypt.
As a result, the fears of cryptocurrency investors boil down to the fact that the US government will overdo it with regulation and make the industry unattractive for novice players. We believe that this is quite possible. However, it is also important to keep in mind that states are competing with each other for the adoption of decentralized assets. This means that a war with full-fledged cryptocurrencies for the United States may be corny unprofitable in the context of the rapid popularization of the Chinese national digital currency. What is especially important is that support for blockchain products will become another source of earning money for the local budget, and this factor should also be taken into account.
This means that it will not be easy to predict the course of events in this case. Therefore, we just have to wait for the specified deadline and get acquainted with it in practice.