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Sen. Warren Presses SEC's Gensler on Crypto Exchange Regulation

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What You Need to Know

  • The increased use of cryptocurrency exchanges presents unique risks to consumers, Warren said.
  • Gensler told lawmakers in May that Congress should look at creating a market regulator for cryptocurrency exchanges.
  • Warren also asked Gensler to describe the extent of the SEC’s existing authority to regulate cryptocurrency exchanges.

Sen. Elizabeth Warren, D-Mass., is signaling that legislation may be needed to give the Securities and Exchange Commission the authority it needs to regulate cryptocurrency exchanges.

In a letter sent to SEC Chairman Gary Gensler on Wednesday and released Thursday, Warren asked Gensler if “Congress needs to act to ensure that the SEC has the proper authority to close existing gaps in regulation that leave investors and consumers vulnerable to dangers in this highly opaque and volatile market.”

Said Warren: “The increased use of cryptocurrency exchanges presents unique risks to consumers. Although they describe themselves as cryptocurrency ‘exchanges,’ these platforms lack the same types of basic regulatory protections as traditional national securities exchanges like the New York Stock Exchange or Nasdaq.”

Warren pointed to comments Gensler made to House lawmakers on May 6, in which he stated that Congress should look at creating a market regulator for cryptocurrency exchanges.

During a question-and-answer session at the May 6 hearing held by the House Financial Services Committee, Gensler stated that “it would be good to consider … whether to bring greater investor protection to the crypto exchanges.”

He continued, “If that were to be the case, because right now the exchanges trading in these crypto assets do not have a regulatory framework either at the SEC or our sister agency the Commodity Futures Trading Commission — that could instill greater confidence. Right now there’s not a market regulator around these crypto exchanges and thus there’s really not protection against fraud or manipulation.”

Warren asked Gensler to tell her by July 28 if he believes that cryptocurrency exchanges are currently operating in a “fair, orderly, and efficient” manner, and, if not, what problems the SEC has identified with the use of these exchanges.

Among her 10 questions, Warren also asked Gensler to describe the extent of the SEC’s existing authority to regulate existing cryptocurrency exchanges, and how that authority differs from the agency’s authority over traditional securities exchanges.