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Burning issues at Code 2021: Crypto regulation high on the agenda

The continued move toward defining a regulatory framework for cryptocurrency assets and infrastructure in the United States, one of the world’s largest markets, is moving up a gear.

Gary Gensler, who is the chairman of the Securities and Exchange Commission (SEC) in the United States is a very well recognized heavyweight. He was one of the commissioners who oversaw the complete overhaul of the investment banking and electronic trading business in the 2010s after the true cost of the global financial crisis had been counted, and was instrumental in advocating some of the most important policies that reformed Wall Street during the time of the Dodd Frank Act.

During an interview Monday evening at the Code Conference in Beverly Hills which is currently underway, Mr Gensler never quite said that he intends to bring cryptocurrencies under SEC regulation, but he came close. He asserted that crypto trading platforms are more likely to succeed if they submit to regulation under existing tax compliance, money laundering, and insider trading laws.

The Code Conference 2021 is an interesting event which among many things addresses the role of tech in our new reality.

Chairman Gensler noted that the U.S. securities laws tend to take a broad view of what constitutes a securities market—he notes that over time that definition has included things like orange groves and eel farms. The commonality, he says, involves groups raising money from investors who are anticipating profits. “I think there is a lot of clarity in the law,” Gensler said. “This won’t end well if they stay outside the regulatory space.”

Mr Gensler was recently interviewed by Preet Bharara, the former U.S. attorney for the Southern District of New York, who has dealt with many high profile cases ranging from public corruption to various Tier 1 bank lawsuits and insider trading litigation and is now the host of a popular podcast.

Mr Bharara repeatedly grilled Gary Gensler about his views on crypto—and Gensler left little doubt that he thinks crypto creating, trading, and lending come under existing definitions of securities trading. While Bharara conducted the conversation live on stage, Gensler participated via a video link.

Mr Gensler’s view is that crypto trading would actually benefit from clearer regulation. He makes the analogy that the automobile market benefited from the development of streetlights, stop signs and traffic cops. Football and basketball, he says, wouldn’t likely succeed in the long run without referees and rules.

Differing from Mr Gensler’s view is maverick crypto influencer Elon Musk, who is also at the Code 2021 conference. “It is not possible to, I think, destroy crypto, but it is possible for governments to slow down its advancement,” he said in an interview at the Code Conference in Los Angeles on Tuesday September 28.

This is bluster in the usual way that we have come to expect from Elon Musk, however Mr Gensler’s calm and pragmatic move toward regulation is one that should be welcomed.

Just over a month ago, the value of major cryptocurrencies rallied back to the high values that they had been at before the massive downturn in May this year, largely due to the confidence which was inspired by Mr Gensler’s position on bringing in a regulatory framework.

It is therefore encouraging that Mr Gensler took this view to the audience at Code 2021, and even more encouraging that it has been accepted as a good move for sustainability and further development of blockchain projects and cryptocurrency infrastructure going forward.