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What do seatbelts have to do with crypto lending?

Seatbelts come standard in every car. That’s true despite many innovations in automotive technology. Whether a car is four-wheel drive or two-wheel drive, whether it runs on gasoline or electricity, drivers and passengers deserve to be protected.

Similarly, our federal securities laws protect investors. There’s no reason to treat crypto markets differently from the rest of the capital markets just because it uses a different technology. Compliance with our laws protects the investing public. Unfortunately, some platforms that offer crypto lending aren’t complying with the requirements.

Consider this hypothetical: Bob runs an app that promotes 7 percent returns, and Alice and millions of other everyday investors put their assets in Bob’s app. Disclosures help Alice understand what Bob is doing with her assets. How is he funding the promised return? Is he running a hedge fund, for instance? In essence, what risk is he taking?

Notably, it doesn’t matter what kind of asset Alice put into Bob’s app — cash, gold, bitcoin, chinchillas, or anything else. It’s what Bob does that determines the protections provided by our laws. That’s what the Securities and Exchange Commission found in a recent settlement with the crypto-lending platform BlockFi.

There are costs of complying with securities laws, just as there are costs to carmakers of adding seat belts. Platforms that offer crypto lending need to comply nonetheless. This helps protect investors. It increases trust in our markets.

Getting these platforms to comply with the securities laws will benefit investors and the crypto market.

As with seatbelts in cars, we need to ensure that investor protections come standard in the crypto market.