SEC was puzzled by the competition of cryptocurrencies with banks

For the first time, the US SEC Chairman openly admitted the competition of the cryptocurrency market with the traditional financial system. Speaking at the DACOM conference yesterday, Gary Gensler spoke out against the unregulated circulation of digital stock tokens, government and corporate bonds, and fiat crypto analogs.

The US SEC’s concerns are related to two aspects of the “digitization” of traditional assets: control over the security of the issue with real securities and fiat, the risks of an outflow of funds from the banking system to the blockchain.

Gensler is referring to the illustrative case of Tether, whose USDT collateral fund lost more than 30% of fiat at one time, but hid this fact from clients. The US SEC chairman is also worried about the development of DeFi and CeFi, offering investors in exchange for liquidity supply (TVL) rates at times higher than bank interest.

As a result, the crypto industry attracted $ 277 billion in investments, the amount of which was $ 200 million in 2019. The opening of such services by licensed American exchanges can increase TVL to unpredictable values.

The US SEC admitted in its speech that it cannot fight the development of these areas within the framework of existing legislation. According to him, now the first thing startups turn to lawyers is how to get around regulation, and then raise money by working in the “gray zone” of laws.