Congress to help protect investors from fraud and abuse
Gary Gensler, the chair of the US Securities and Exchange Commission, has called on Congress to give his agency additional powers to protect investors in “Wild West” cryptocurrency markets that are “rife with fraud, scams, and abuse”. Gensler spoke on Tuesday at the Aspen Security Forum as US authorities rush to respond to the explosive growth of the crypto market, which he said has a purported value of about $1.6tn, with more than 75 tokens worth at least $1bn each. Gensler said 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.” Recommended Markets InsightMohamed El-Erian China lays down challenge to the west on crypto 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 said platforms dealing in such securities “have to register [with the SEC] unless they meet some exemption”. “It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides a synthetic exposure to underlying securities,” he said in his prepared remarks. “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 the SEC 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.
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I also think we need more resources. ” Gensler said the “legislative priority” should be to create clear rules of the road for platforms that engage in crypto trading or lending as well as in decentralized finance, or Defi. “Regulators would benefit from additional authorities in this space.” Pronouncing himself “technology-neutral” from a policy standpoint, Gensler noted in his speech that he taught classes on cryptocurrencies at the Massachusetts Institute of Technology.
He said he came away with the belief that although there was “a lot of hype” in the crypto field, “it has been and could continue to be a catalyst for change in the fields of finance and money”.