U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler wants his agency to have greater authority and resources to crack down on the crypto sector.
In a letter to U.S. Sen. Elizabeth Warren (D-Mass.), Gensler said Congress should grant the agency with additional oversight and enforcement abilities to monitor “transactions, products and platforms” in the U.S. crypto sector.
“In my view, the legislative priority should center on crypto trading, lending and DeFi (decentralized finance) platforms. Regulators would benefit from additional plenary authority to write rules for and attach guardrails to crypto trading and lending,” he said.
Gensler’s letter, shared publicly on Wednesday, is a response to an open letter published by Warren last month, when the Massachusetts Democrat asked what authority the SEC has in regulating crypto exchanges and whether there are any gaps.
Warren pointed to how cryptocurrency exchanges serve as custodians for customer funds, saying that the “the lack of regulation to provide basic investor protections is unsustainable.”
“Right now, I believe investors using these platforms are not adequately protected,” Gensler said in his letter.
Stable value tokens
Gensler reiterated previous remarks he’s made about stablecoins in his response.
The SEC chairman, who previously ran the Commodity Futures Trading Commission (CFTC) from 2009 to 2014, said stablecoin users may be trying – if not outright able – to evade anti-money laundering, tax, sanctions and other regulations.
“There is an existing stablecoin market worth $113 billion, including four large stablecoins – some of which have been around for seven years,” he said. “These stablecoins are embedded in crypto trading and lending platforms. To trade crypto-to-crypto, usually, somebody uses stablecoins. In July, nearly three-quarters of trading on all crypto trading platforms occurred between a stablecoin and some other token.”
Gensler has previously warned that stablecoins might fall under securities regulations if they are themselves backed by securities.
In a statement on Wednesday referring to crypto as the “Wild West of our financial system,” Warren said the industry needs better regulation to protect both the financial system and investors.
“I’m glad SEC Chair Gensler agrees and has directed the SEC to use its full authority to address these risks, and that he has also identified where additional regulatory authority may need to be granted by Congress,” Warren said. “I’m going to continue to engage with the SEC and other federal regulators on this, and will work to close regulatory gaps through legislation.”
It’s unclear whether Warren intends to introduce legislation calling for new regulations to address Gensler’s concerns or whether other federal agencies or private companies will also be solicited for their views on the issue.