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SEC’s Gensler Warns Crypto Platforms Suggesting Returns Subject To Oversight

Cryptocurrency platforms that attract investors with the hope of returns will be subjected to regulations, Security and Exchanges Commission Chair Gary Gensler said at the Future of Asset Management North America conference hosted by Financial Times.

He said that the numerous crypto platforms that took investors’ money in exchange for returns “should consider the securities laws carefully and talk to the agency about getting registered” and added that “Many of them should [register] now — or should have even in the past.”

Gensler warned that crypto investors are “likely to get hurt” if mandates aren’t put in place to oversee the digital asset space. He the space needs the same kind of laws and protections against fraud and manipulation that other banking and investment products have.

See also: SEC’s Gensler to Appear Before Senate Banking Committee on Regulating Crypto

“This crypto space is now certainly of a size that without those investor protections of banking, insurance, securities laws [and] market oversight, I do think somebody is going to get hurt,” Gensler said during the conference. “A lot of people are likely to get hurt.”

The SEC’s position comes from the Howey Test, based on a Supreme Court ruling that maintains that an investment agreement falls under federal securities law if “a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.”

In Gensler’s prepared remarks, he pointed to the SEC’s history and said that the agency now oversees approximately 14,000 registered investment advisers that handle 48 million clients and close to $112 trillion in regulatory assets. Private equity funds have grown 58 percent since 2016 and venture capital funds grew 110 percent.

See: SEC Chair Wants More Crypto Oversight Authority

“The asset management field not only is growing; it is evolving. SEC staff are seeing new strategies, structures, and business practices. Technology is rapidly changing. This trend not only creates new opportunities, but also risks for markets and investors. The SEC must grow and evolve with the industry,” Gensler said.

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