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Gary Gensler, head of the Securities and Exchange Commission announced the organization will take action against risks faced by investors trading cryptocurrencies. In a recent speech, he said investors are not accessing enough information to judge the risk, and asserted “I worry a lot of people will get hurt.”

Lack of Support

In the allocution, Gensler pointed to the lack of transparency and clear regulations for those wanting to dabble into the crypto world and prompted Congress to give regulators the power to rewrite the current financial rules on crypto.

He also asked for more monetary and staff resources as the SEC has moaned about the Congress’ lack of support. “We need additional congressional authorities to prevent transactions, products, and platforms from falling between regulatory cracks,” he was quoted as saying on CNBC.

The most urgent action to take, he said, is to create clearer definitions for some of the most basic terms to align crypto with the financial framework, to determine, for instance, whether Bitcoin is a commodity or if assets being traded on cryptocurrency exchanges are securities.

The implications of such definitions transcend into matters of jurisdiction, as they will determine which authority should regulate crypto assets.

Rewriting the Law 

Since the crypto market has grown so quickly and is worth nearly $2 trillion, regulatory structures are struggling to catch up and adapt. 

At present, both the SEC and the Commodity Futures Trading Commission shoulder policing responsibilities, albeit following the current law, which is framed for more conventional assets like stocks and bonds. 

Robert J. Jackson Jr., New York University Law School Professor an SEC ex-commissioner, replicated Gensler’s sentiment by saying “It’s past time for regulators to be clear about who is responsible for this, and that clarity will be beneficial to the market.” 

Looking for Benefits

Jackson further asserts, “It will be beneficial to investors. It will even be beneficial to those members of Congress and the other public policymakers who want to know whom to ask, and who to hold accountable for what is going on in those markets.”

According to Tiffany J. Smith, a partner at the law firm WilmerHale, “We are going to see both the SEC and the CFTC using their current authorities to regulate the market as best they can.”

In the meantime, as Bitcoin value has skyrocketed by 300%, both amateur and professional investors have started buying and trading crypto, lured by the potential dividends. The market is marred by extreme volatility, and while it becomes “more legitimate” it will also attract the wrong people.