Security or Not: SEC Chair Browbeats Renowned Digital Wallet Platform
SEC Chair, Gary Gensler seeks to regulate a DeFi loan product by reputed digital wallet platform labelling it a security. Company fights back.
SEC 33rd Chair, Gary Gensler storms a reputed cryptocurrency exchange demanding answers failing which he threatens a lawsuit. The Crypto community battles it out on Twitter as SEC upholds its stance as a protector of the interests of investors and a facilitator of fairness and efficient market.
The crypto exchange had already announced its launch of a high-return product. This product would gain a competitive ground with other reigning DeFi products in the market. The product involves operating a lending pool focused on USD Coin (USDC), a stable coin that is pegged to USD.
A successful launch would enable users to contribute to the loan platform by offering their crypto assets to be available for loans. The company plans to lend out those crypto assets. The users earn high interest in contributing to the lending pool. The company assures 4% APY on its preview page.
The company CEO reacts strongly stating that they had presented the details of the product offering to SEC much ahead of its launch. The SEC, in response, initiated a chain of investigative actions on the company demanding a series of documents and testimony from employees. The company reportedly complied.
SEC followed up by informing the company that the proposed product circumscribes security, refusing to reveal details of what led to the conclusion. Instead, SEC closed it up with a threat to file a lawsuit in case the product was launched.
A company spokesperson points out that there are other companies who have launched similar products on a DeFi lending system without any interception from SEC.
What Most Will Miss
Securities and Exchange Commission (SEC) is largely concerned about safeguarding the investors and also ensuring transparency and fair play, particularly on the decentralized ground.
On the other hand, the loaning platform as formulated by the company does nothing to protect its investors and mentions so at the bottom of their page in the fine print.
Despite this, what draws investors to lucrative DeFi products is their faith in the enormous possibilities with DeFi products. While decentralized finance doesn’t safeguard the investors’ interests it also doesn’t restrict the flow of funds by any measure and lies beyond the scope for government intervention. This alone warrants the high yields possible through the DeFi platforms.
Regulations — The Way They Should be
While cryptocurrency, DeFi platforms, and other blockchain-driven products should be regulated, excessive imposition will stifle their growth and nip off the very potential that renders them powerful, liberating, and democratic without any centralized control.
For once, the common people get a free and fair chance to redeem the fortune they deserve through uninterrupted, and unregulated means. Despite the risk of loss that comes under the wraps, the possibilities of gain are far higher. The authorities should emphasize the risks and regulate the portion of investment by each investor to ensure they only part with what they may afford to lose without impacting their socio-economic standing or their immediate future.