The SEC took 15 years to adopt securities-lending regulation, let’s hope it won’t for crypto

• The Securities and Exchange Commission adopted a rule to increase transparency and efficiency in the securities-lending market.
• Some people, like Caitlin Long, criticized the regulator for taking 15 years to come up with a solution.
• While the crypto market may not need to wait another 15 years, given the rapid growth of the market, it could still take some time. 

Cryptocurrency regulation has been a hot topic in the United States ever since the Securities and Exchange Commission (SEC) filed a lawsuit against Ripple at the end of 2020. Since then, the lawsuit has nearly come to a conclusion, but the regulatory body has still not come up with proper regulations.

SEC adopts new rule for securities

The SEC, in an announcement on Friday, stated that it would be adopting a rule to increase transparency and efficiency in the opaque securities-lending market. Securities lending involves the borrowing for a fixed time of a security by one party from another. For some institutions who only need short-term liquidity it sometimes makes sense to borrow rather than outright buy a security.The SEC’s new rule is intended to close data gaps by providing market participants with timely access to pricing and other material information about securities-lending transactions.

This announcement was met with mixed reactions, as users of X, formerly Twitter, criticized the SEC in various ways.

Among these people was the founder and CEO of Custodia Bank, Caitlin Long, who tweeted,

“OK I applaud this in concept. Securities lending is where MANY shenanigans happen in traditional finance. The SEC is right to point to it as a problem in the 2008 financial crisis too—15 years later, it’s a market that REALLY needed regulator attention & apparently just got it.

While this seemed like a genuine post of appreciation, it included a  subtle dig about taking 15 years to come up with the solution or at least pay attention to the issue.

It is true that the SEC did take 15 years to get to grips with the securities-lending market’s problems. This might worry crypto investors if the crypto market were to suffer a similar fate. However, even though the market is holding strong at the moment, it did not do so a little while back. 

2022 and 2023 noted a significant drawdown in the Bitcoin price and crypto market’s value, even falling under $1 trillion at one point. This also includes the biggest fraud in the history of the country - the collapse of FTX. 

The crypto market could make or break

Although 15 years is a long time, it is also not so long considering Bitcoin was only launched 15 years ago, in 2008. The digital assets only gained attention towards the launch of Ethereum, which introduced smart contracts. 

The crypto market is still struggling to establish itself as a stable investment option that has no oversight. Using regulation by enforcement, the SEC is apparently “regulating” the crypto market. SEC chair Gary Gensler has time and again reiterated that crypto regulations are ‘unnecessary’ and that the SEC should solely keep an eye on the individuals and projects.

If approved, it could take some time before actual regulations come into place and given the volatility of the crypto market these could lead to some hefty moves.