Gary Gensler – Chairman of the Securities and Exchange Commission (SEC) – spoke about crypto during the RFK Human Rights Compass Summer Investors Conference on Tuesday. He cautioned the public about the returns that some companies within the crypto space are promising, which he views as “too good to be true.”
Too Good to be True
As reported by The Globe and Mail, the chairman believes that lending platforms are currently operating “a little like banks.” They commonly offer returns between 4.5% to 7% per year to consumers who deposit funds with their platforms.
“How does somebody offer (such a large percentage of returns) in the market today and not give a lot of disclosure?” said the chairman.
Other entities within the crypto space have offered even larger returns. Celsius network offers 17% APY on users’ deposits. Anchor protocol – a defi protocol that formerly held most TerraUSD (UST) stablecoins in circulation – offered up to 20% APY.
Both networks are now in shambles. Celsius has been forced to freeze customers’ deposits while it attempts to pay off its debt, while UST has entirely lost its dollar peg, forcing the network to start anew.
Crypto lenders are not highly regulated and lack the typical consumer protections of traditional banks. That’s something the chairman has long strived to fix – including among stablecoin issuers.
Senator Elizabeth Warren – a long-time crypto skeptic – shared similar views on Tuesday.
“Too many crypto firms have been able to scam customers with too-good-to-be-true claims about safe sky-high returns, leaving ordinary investors holding the bag while insiders make off with their money,” she said in an e-mailed statement to Bloomberg.
Gensler’s Position on Ether
The SEC chairman is well-known for his personal opinion that “most” cryptocurrencies on the market are securities, while few are commodities. Senator Cynthia Lummis agrees with him on the point.
Which of these categories Ether falls into, in Gensler’s opinion, remains unclear. In an interview with CNBC earlier this year, he avoided offering any confirmation as to whether Ether was actually a commodity or security. On the other hand, Senator Kirsten Gillibrand claims his position is that Ether is a commodity.
Ether is the cryptocurrency that powers the Ethereum ecosystem, which is currently responsible for powering the vast majority of the defi space – where the most unregulated yield offerings lie.