What You Need to Know
- The SEC needs more power to prevent transactions, products and platforms from falling between regulatory cracks, Gensler said.
- Investors using these crypto platforms are not adequately protected, the SEC chief told Warren.
- Regulators would benefit from added plenary authority to write rules for and attach guardrails to crypto trading and lending, he said.
The Securities and Exchange Commission needs additional powers to regulate the cryptocurrency arena, specifically to “prevent transactions, products and platforms from falling between regulatory cracks,” SEC Chairman Gary Gensler told Sen. Elizabeth Warren, D-Mass.
The SEC also needs “more resources to protect investors in this growing and volatile sector,” Gensler told Warren in a recent letter.
“In my view, the legislative priority” should center on crypto trading, lending and centralized and decentralized finance, or DeFi, platforms, Gensler said.
Gensler was responding to a July 7 letter from Warren in which she asked if Congress needs to act to give the SEC “the proper authority to close existing gaps in regulation that leave investors and consumers vulnerable to dangers” in the highly opaque and volatile digital assets market.
In his Aug. 5 letter to Warren, released Tuesday, Gensler noted his recent remarks before the Aspen Security Forum, in which he warned that there isn’t “enough investor protection in crypto” and that “it’s more like the Wild West.”
Right now, Gensler told Warren, “I believe investors using these platforms are not adequately protected. The world of crypto finance now has platforms where people can trade tokens and other venues where people can lend tokens. The American public is buying, selling, and lending crypto on these venues, both centralized and decentralized finance (‘DeFi’) platforms.”
These various platforms, he continued, “not only can implicate the securities laws, some platforms can also implicate the commodities laws and the banking laws. This raises a number of issues related to protecting investors and consumers, guarding against illicit activity, and ensuring financial stability. A typical trading platform has more than 50 tokens on it.”