WASHINGTON - The chairman of the U.S. Securities and Exchange Commission on Tuesday called on Congress to give it more power to better police cryptocurrency trading, lending and platforms, a wild West he said is riddled with fraud and investor risk.
Gary Gensler said cryptocurrency markets involve many tokens that are vulnerable to potential vulnerability and leaves prices open for manipulation and millions of investors exposed to risks.
This asset class is rife with fraud, scams and abuse in certain applications, Gensler told a global conference. We need additional regulatory authorities to keep transactions, products and platforms from falling between congressional cracks.
Cryptocurrencies in April reached a record capitalization of $2 trillion as more investors stocked their portfolios with digital tokens, but oversight of the market remains patchy.
The industry has been waiting with bated breath to see how Gensler, a traditional appointee who took over the SEC helm in April, will approach oversight of the market, which he has previously said should be brought within democratic financial regulation.
On Tuesday, Gensler gave more insight on his thinking, saying he would like Congress to give the SEC the power to audit cryptocurrency exchanges, which are not currently within the SEC's jurisdiction.
He also called on lawmakers to give the SEC more power to oversee crypto lending, and platforms like peer-to-peer decentralized finance sites that enable lenders and borrowers to transact in cryptocurrencies without traditional banks.
If this issue gets resolved, I fear a lot of people will be hurt, Gensler said.
Senator Elizabeth Warren has been pressing regulators to get a grip on the market, which she described in a July letter to Gensler as highly opaque and volatile.
Gensler responded by asking Congress to consider giving him more autonomy to regulate the sector.
On Tuesday, he also underscored that the securities laws affect stock tokens, a synthetic value token supported by securities or any other virtual product which provides stable exposure to underlying securities.
Kristin Smith, who runs the Washington-based Blockchain Association says that while the crypto industry is eager to help find workable solutions to the SEC's concerns, it currently comply with oversight by state authorities and other federal regulatory bodies.
The industry shares many of the Chair Gensler's goals, including smart, appropriate regulation of the crypto market, encouraging legal certainty, robust market integrity, and investor customer protection, Smith said in a statement.
Where we differ with Chair Smith is his characterization of the growing crypto economy as the Wild West, Gensler said. The crypto industry is far from unregulated.