For months now, regulators in the US have been calling for stricter monitoring of stablecoins. But this week saw the strongest hint of incoming restrictions against the much talked about assets. In particular, Securities and Exchange Commission (SEC) Chair Gary Gensler has suggested that stable currencies should be treated as securities. Gensler was addressing the American Bar Association when he raised the issue of stablecoin regulation.
Following Treasury Secretary Janet Yellen’s comments on the need for regulating stablecoins and their potential disruptive effects, SEC chair Gary Gensler hinted that cryptocurrencies backed by traditional assets should fall under securities laws.
In a keynote address to the bar association, Gensler said that many crypto exchanges were offering tokens “that are priced off” the value of securities and behave like derivatives.
Although Gensler did not mention any specific tokens, it is obvious that his comments are aimed at Circle’s USD Coin (USDC) and Tether’s USDT token. The dollar-pegged stablecoins have found themselves on the radar of regulatory agencies lately, where they’ve been discussed at length as a threat to financial systems.
Besides stablecoins, Gensler also showed concern about synthetic stocks that have garnered significant attention in the DeFi sector. The SEC chair clarified that synthetic shares mirroring the performance of blue-chip stocks like Apple, Amazon, and Tesla should also be treated as securities. Furthermore, he asserted that his agency would use all the resources at its disposal to go after entities offering such assets without an SEC registration.
Synthetic stocks or fake stocks have exploded in popularity on DeFi platforms, with Synthetix and Mirror Protocol leading the trend. These facsimiles of big-name stocks track the performance of companies, but they have no actual value backing them. Traders seeking to invest in stock markets without regulations have hailed them for their accessibility feature. However, regulators have been largely disapproving of them and their stance has started to impact the crypto industry. Last week, Binance announced that it was dropping support for all assets linked to equities.
Even so, synthetic stocks have found favor among people who are unable to trade equities due to regulations or have a general disdain for the traditional financial system. Do Kwon, the co-founder and CEO of Mirror Protocol, believes: