SEC Chair says centralization has arrived in the market whether the community wanted it or not.
Gensler again
SEC Chair Gary Gensler will not let up on crypto. It has been his mission to put crypto in a place where he and his office can have the most centralized control. In speaking on crypto Gensler once again stated that crypto is indeed a centralized system no matter if the community is stating it as decentralized. Gensler states that there is a disproportionate amount of power wielded by centralized crypto exchanges such as Coinbase and Binance.
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Gensler made his comments during the annual Securities Industry and Financial Markets Association which is a prominent trade group that represents securities firms, banks, and asset managers that are focused primarily on focusing fair competition among equity market makers. Gensler never one to back down from an opportunity to take shots at the crypto industry decided to take a stab at the crypto community yet again while cautioning about the danger of centralization in traditional finance. During his speech he made the following comment:L
We’ve seen centralization in teh crypto market, which was founded on the idea of decentralization, this field actually has significant concentration among intermediaries in the middle of the market”
Gensler likened the crypto exchanges to the middle part of an hourglass stating the financial intermediaries touch every transaction as they flow to and from the exchanges. The transactions can lead to these intermediaries capturing profits disproportionately due to their advantageous positions. Gensler stated a number of exchanges operate this way but did not explicitly name which ones he was talking about.
“There’s a tendency for central intermediaries to benefit from scale, network effects, and access to valuable data, though technological innovations repeatedly disrupt incumbent business models, centralization still tends to reemerge”
Gary Gensler
Federal agencies
Federal agencies around the world have begun formulating plans for regulations of crypto services and centralized exchanges. The Treasury Department’s Office of Foreign Asset Control recently sanctioned Tornado Cash, an Ethereum coin-mixing tool, and blacklisted numerous addresses that were associated with that platform as well. There are those that have taken this action negatively stating that the government has taken away a founding tenet of crypto. This has led to a fork in the way the crypto community has dealt with the government. More centralized exchanges have taken all necessary steps to comply with the regulations given by OFAC and blacklisted Tornado Cash as well, more decentralized exchanges have doubled down on the hostility towards the American government and continue to focus on giving users more privacy.
Crypto compliance and consequences
Circle was a company that complied with the OFAC regulations but later the CEO of Circle, Jermy Allaire, stated how he felt his hand was being pushed.
“Complying with Tornado Cash sanctions comprimised our belief in the value of open software on the internet and our belief that the presumption and preservation of privacy should be enshrined as a design principle in the issuance and circulation of dollar digital currencies”
One other issue is the Commodities and Futures Trading Commission deep in an ongoing lawsuit against a DAO. The lawsuit would see the entire membership of the DAO held liable for the consequences of all DAO-wide votes. This lawsuit would destroy DAOs as they currently are and thus destroy a cornerstone of decentralization. The lawsuit could very well destroy all DAOs within the United States.
Gensler and the SEC will not let go of their crusade against crypto and the message is being made very clear to those that are in the community, there is a line being drawn in the sand and the fate of crypto and defi is hanging in the balance.
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