SEC’s Gensler seeks new powers to regulate ‘Wild West’ crypto markets


Cryptocurrencies updates

Gary Gensler, the chair of the US Securities and Exchange Commission, has called on Congress to give financial regulators additional powers to protect investors in “Wild West” cryptocurrency markets that are “rife with fraud, scams and abuse”.

Gensler was scheduled to speak on Tuesday before the Aspen Security Forum as US authorities scramble to respond to the explosive growth of the crypto market, which he said has a purported value of about $1.6tn, with 77 tokens worth at least $1bn each.

Gensler said in his prepared remarks that he saw few signs crypto assets were catching on as a medium of exchange, apart from their use in ransomware attacks or “to skirt our laws with respect to anti-money laundering, sanctions, and tax collection”.

He suggested that they be viewed as “highly speculative stores of value”, putting an onus on regulators to protect investors in the asset class.

“Right now, we just don’t have enough investor protection in crypto,” he said. “Frankly, at this time, it’s more like the Wild West. This asset class is rife with fraud, scams, and abuse in certain applications.”

Gensler added: “There’s a great deal of hype and spin about how crypto assets work. In many cases, investors aren’t able to get rigorous, balanced, and complete information. If we don’t address these issues, I worry a lot of people will be hurt.”

Gensler vowed that the SEC would act under its existing authority to regulate crypto assets that can be defined as securities under US law. He added that platforms dealing in such securities “have to register with the commission”.

“It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities,” he said. “These products are subject to the securities laws and must work within our securities regime.”

However, Gensler said Congress also needed to take action to give US regulators additional powers to protect investors in cases where the rules regarding crypto assets are less clear.

“There are some gaps in this space,” he said. “We need additional congressional authorities to prevent transactions, products, and platforms from falling between regulatory cracks. We also need more resources to protect investors in this growing and volatile sector.”

Gensler said the “legislative priority should centre on crypto trading, lending, and DeFi (decentralised finance) platforms. Regulators would benefit from additional plenary authority to write rules for and attach guardrails to crypto trading and lending.”

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