SEC Chair Gary Gensler calls on Congress to regulate crypto "Wild West"

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler declared war on crypto trading, what he described as the “Wild West,” and called on Congress to give the agency more authority to deal with fraud and misconduct.

Gensler outlined his desire to regulate cryptocurrencies to the same extent as stocks, bonds, and commodity-related trading instruments as he said that the market involves many unregistered tokens, leaving the prices open to manipulation, exposing millions of investors to risks.

“This asset class is rife with fraud, scams, and abuse in certain applications,” Gensler said at Aspen Security Forum. “We need additional congressional authorities to prevent transactions, products, and platforms from falling between regulatory cracks.”

In April, cryptocurrencies reached a market capitalization of $2 trillion as more investors invested in digital tokens, but market oversight remains patchy.

The industry has been waiting to see how Gensler will approach oversight of the market, which he has previously said should be brought within the purview of traditional financial regulation.

Gensler said he would like Congress to give the SEC the authority to oversee cryptocurrency exchanges and decentralized finance (DeFi) platforms that allow lenders and borrowers to transact in digital token without traditional banks, which are not currently within the SEC’s purview.

“If we don’t address these issues, I worry a lot of people will be hurt,” Gensler said.

Democratic 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 replied by asking Congress to consider granting him more autonomy to regulate the sector.

He also emphasized that “stock tokens, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities ... are subject to the securities laws.”

Kristin Smith, who runs Blockchain Association, told Reuters that while the industry is eager to help find “workable solutions” to the SEC’s concerns, it currently complies with oversight by state authorities and other federal regulatory bodies.

“The industry shares many of Chair Gensler’s goals, including smart, appropriate regulation of the crypto industry, encouraging legal certainty, robust market integrity, and investor/customer protection,” Smith said.

“Where we differ with Chair Gensler is his characterization of the growing crypto economy as the ‘Wild West,’ Smith said. “The crypto industry is far from unregulated.”

Picture Credit: WSJ