Shortly after Gary Gensler pulled a Mike Richards and hired himself for the job he was charged with vetting candidates to fill, we mused that it was perhaps bad for the cryptocurrent world that the future Securities and Exchange Commission chairman had become an expert therein after giving up his Luddite ways. Well, Gensler taught and studied more than just fake money during his inter-Democratic president years at MIT, and that now seems like pretty bad news for fintech firms of all shapes and sizes.
The SEC plans to launch a sweeping consultation in coming days that could have major ramifications for retail brokers, wealth managers and robo-advisers, which increasingly use such tools to drive customers to higher-revenue products.
"We're at a transformational time. I really believe data analytics and AI can bring a lot of positives, but it means we should look back and think about what does this mean for user interface, user engagement, fairness and bias," said Gensler. "What does it mean about rules written in an earlier era?"…
Certain behavioral prompts could potentially be considered investment advice and regulated as such, he added…. Gensler echoed a growing worry among regulators that such tools may perpetuate discriminatory behavior…. "The data that's coming in to these data analytics, whether it be machine learning or deep learning, will represent the biases in society, as they exist already," he said.
In a recent meeting with an industry lobbying group, the Blockchain Association, Mr. Gensler promised tougher discipline if exchanges and other businesses continue to offer assets without complying with the appropriate rules.
“You may look at it as regulation by enforcement,” Mr. Gensler told the group, according to a summary of the meeting that was seen by The Wall Street Journal. “I just call it bringing people into compliance that are over the line….”
Regulators including Mr. Gensler say that stablecoins, because they are backed by securities, may qualify as investments that should be regulated.
“People have already been hurt and more people will be hurt without those fundamental investor protections,” Mr. Gensler said in an interview.
Bitcoin prices topped $50,000 for the first time in three months Monday…. After skidding to a low of $29,608 last month, bitcoin has leapt 70%.
U.S. SEC to scrutinize firms' digital-engagement practices as investor worries grow [Reuters]
Cryptocurrency’s Surge Leaves Global Watchdogs Trying to Catch Up [WSJ]
Bitcoin Prices Pass $50,000 for First Time Since May [WSJ]
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