DeFi Will End Poorly Without Investor Protections, Gary Gensler Says

U.S. Securities and Exchange Commission Chairman Gary Gensler said the decentralized finance (DeFi) industry is one of the most innovative areas in the cryptocurrency market, but it can't evade monetary regulations. 

He was speaking at Yahoo Finance's All Markets Summit. 

Gensler said it took regulators about three or five years to bring peer-to-peer systems within investor protections, and this is the process he is now seeing in DeFi. 

"There's a lot of lending going on. There's a lot of trading going on. And without protection, I fear that it's going to end poorly," Gensler added.

Gensler believes that financial stability and public protection are the primary concerns for him. 

When asked whether stablecoins should be regulated similarly as banks, Gensler admitted that this is something the SEC is looking at.

"There's about $130 billion of stablecoins today, that's up nearly tenfold in the last year," said Gensler. 

In August, the SEC filed its first unregistered security lawsuit against a DeFi development firm.

As Benzinga explained in a recent report, the SEC made it very clear that slapping the DeFi label on a project and hoping to avoid regulation does not work.

DeFi allows users to participate in the financial system without the need for any third-party intermediaries such as banks and other financial institutions.