SEC Chair Evokes Ghost Of Great Depression To Slam Crypto's Lack Of Disclosures

Drawing parallels between today's cryptocurrency landscape and the financial markets of the 1920s, SEC Chair Gary Gensler has called for heightened disclosures to protect investors.

Gensler, speaking at the DC Fintech week, referenced Franklin D. Roosevelt's Truth in Securities Act, emphasizing the importance of clear and honest disclosures for investors: "I don't want folks to sort of mislead them or pick their pockets. That's all. Give them disclosure."

Providing accurate information is critical, he explained, especially when dealing with complex financial products that can perplex even seasoned experts.

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Gensler's reference to the 1920s serves as a cautionary reminder of the unchecked speculation that led to the Great Depression, a time of little investor protection and rampant market manipulation.

He drew a direct comparison to the current state of the cryptocurrency market, noting, "It was quite the 1920s," and highlighted that the lack of disclosure "is not a particularly good thing," pointing out that some academic studies suggest minority communities have been disproportionately harmed by the opaque nature of crypto investments.

The SEC Chair advocated for the "sunshine" of transparency in capital markets, indicating it as an essential element that underpins the confidence and fairness of the financial system.

He acknowledged the growth in retail investor participation, a trend he welcomes and sees as a part of the SEC's mission to foster fair, orderly, and efficient markets.

Technological Neutrality: Gensler, with a nod to his MIT days, conveyed excitement about the potential of artificial intelligence (AI) and predictive data analytics in finance while maintaining the need for regulatory frameworks that keep pace with rapid innovation.

"We try to bring our ruleset into the 2020s, which often hasn't been updated in 15 to 30 years," he said, acknowledging the challenges and transformative power of these technologies.

As Gensler looks forward, his focus remains on ensuring that the SEC's regulations are designed to protect investors, maintain fair markets, and accommodate the continuous evolution of technology in finance.

His remarks point to a regulatory horizon keen on balancing the promise of technological advances with the imperative of investor protection, a balance that will be crucial for fostering the future of digital assets.

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