Former US regulator and Wall Street analyst, Gary Gensler, has given his view on blockchain technology and notes that Ether and Ripple should be considered as non-compliant securities.
With the overarching theme for cryptocurrencies in the US for 2018 seemingly being ‘regulation and criticism’, the standpoint of the former US regulator cements the belief held by some that cryptocurrencies cannot be trusted.
Having headed the Commodity Futures Trading Commission (CFTC) under former US president Barrack Obama’s administration, Gary Gensler also at the time worked closely with the US Securities and Exchange Commission (SEC) in coming up with a proper regulatory framework for cryptocurrencies and other related transactions in the US.
According to the New York Times, Mr Gensler had flayed cryptocurrencies stating that the crypto community’s favorite, Bitcoin, could not be termed as a security since its launch was basically issued via a “decentralized network of developers” and not through the issuance of an ICO. However, he continued that while Bitcoin is out of the race, Ether and Ripple are directly in the centre of the issue since they could be considered securities but they do not fit into compliance with the US SEC law on ICOs.
“There is a strong case for both of them – particularly Ripple – that they are both non-compliant securities.” he reportedly said.
While the involvement of the US regulators in cryptocurrencies could facilitate growth in the US, it could also mean trouble for the top players in the crypto Industry.
In response to Gary Gensler’s claims, the leadership of the two digital currencies tried to set the record straight by arguing that the coins were not securities.
The New York Times reported that head of the Ethereum Foundation, Aya Miyaguchi, claimed that, at the time of writing, the foundation currently held the lowest percentage of Ether (about 1 percent) while noting that the foundation holds no control over the issuance or distribution of Ether into the ecosystem.
While Gary Gensler noted that Ether could avoid being sanctioned as a non-compliant security since the advancement of Ether had in recent times tended towards decentralization, Ripple was left with a strong case of defending itself.
Ripple’s Tom Channick responded to Mr Gensler’s statement that XRP could not be considered a security by saying that: “XRP exists independent of Ripple and was created before the existence of Ripple and as such, it does not give its owners an interest or a stake or share in Ripple.”
Gary Gensler, despite his take on cryptocurrencies and the need for regulation, sees the potential of the underlying blockchain technology upon which cryptos are built and believes that the technology would go a long way in reforming the traditional financial services system.
“I would be surprised if 10 years from now this isn’t somewhere in the financial system in a meaningful way.” he said.