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 <a href="https://www.sec.gov/news/speech/gensler-remarks-aba-derivatives-futures-law-committee-virtual-mid-year-program-072121" target="_blank" rel="nofollow noopener">addressing</a> the American Bar Association when he raised the issue of stablecoin regulation.
<h2>Gary Gensler Wants Stablecoins to Report to the SEC </h2>
Following Treasury Secretary Janet Yellen’s comments on the need for regulating stablecoins and their potential disruptive effects, SEC chair <a href="https://www.cryptoknowmics.com/news/us-treasury-secretary-janet-yellen-will-be-discussing-stablecoins-with-the-presidents-working-group/">Gary Gensler hinted that cryptocurrencies</a> 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.

“Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities,” Gensler noted. 

“These platforms – whether in the decentralized or centralized finance space – are implicated by the securities laws and must work within our securities regime.”

Although Gensler did not mention any specific tokens, it is obvious that his comments are aimed at Circle’s <a href="https://www.cryptoknowmics.com/news/circle-reveals-usdc-is-mostly-backed-by-cash-and-cash-equivalents/">USD Coin</a> (USDC) and Tether’s <a href="https://www.cryptoknowmics.com/news/tethers-usdt-stablecoin-is-a-risk-to-the-financial-stability-us-fed-official/">USDT</a> 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.

Gensler warned that the SEC may also look into enforcement actions while stating that the agency has already brought “some cases involving retail offering of securities-based swaps.” This could be a reference to SEC’s case against fintech platform <a href="https://www.cryptoknowmics.com/news/abra-pays-penalty-of-300k-to-regulators-for-illegal-swapping/">Abra</a>, which was asked to pay $300,000 in fines for selling security-based swaps to its users in 2020.
<h2>Gensler Issues Stern Warning Against Selling Synthetic Stocks</h2>
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.

<a href="https://www.cryptoknowmics.com/news/derivatives-and-synthetic-assets-in-defi/">Synthetic stocks or fake stocks</a> 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, <a href="https://www.cryptoknowmics.com/news/binance-burns-bnb-tokens-worth-3936-million/">Binance</a> 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:

"Decentralized finance is so powerful in unlocking financial services for disenfranchised people around the world," and “waiting for fragmented regulatory frameworks to crystallize before innovating is counterintuitive.”

SEC Chair Gary Gensler Suggests Stablecoins Are Securities

In a first, Securities and Exchange Commission(SEC) chair Gary Gensler has suggested that stablecoins should be treated as securities.

Divya is a postgraduate from Jawaharlal Nehru University specializing in International Relations and a professional writer with more than 5 years of experience writing for the web. She is an avid reader interested in the global financial system and the effects of decentralization. At Cryptoknowmics, she hopes to deliver clear and understandable content to inform readers about the latest events in the crypto sector.

SEC Chair Gary Gensler Suggests Stablecoins Are Securities

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