Crypto is like the 'Wild West,' SEC needs 'additional Congressional authorities' – SEC Chairman Gensler
(Kitco News) Securities and Exchange Commission (SEC) Chairman Gary Gensler pointed to a lack of investor protection in the crypto space and called on Congress for additional authority and resources to oversee cryptocurrencies.
"Right now, we just don't have enough investor protection in crypto. Frankly, at this time, it's more like the Wild West, Gensler said during the Aspen Security Forum on Tuesday. "We have taken and will continue to take our authorities as far as they go."
Gensler said there are gaps in oversight, especially when it comes to trading, lending, and decentralized finance platforms.
"Certain rules related to crypto-assets are well-settled. The test to determine whether a crypto asset is a security is clear. There are some gaps in this space, though: We need additional Congressional authorities to prevent transactions, products, and platforms from falling between regulatory cracks. We also need more resources to protect investors in this growing and volatile sector," he said. "Legislative priorities should be around trading, lending and decentralized finance platforms. Where we can use some additional work with Congress is these platforms."
Gensler also called on crypto platforms to come forward, register, and work with the SEC.
"Right now, large parts of the field of crypto are sitting astride of—not operating within—regulatory frameworks that protect investors and consumers," Gensler said. "The world of crypto finance now has platforms where people can trade tokens and other venues where people can lend tokens. I believe these platforms not only can implicate the securities laws; some platforms also can implicate the commodities laws and the banking laws."
The SEC chairman added the U.S. laws are clear at this point: "Make no mistake: To the extent that there are securities on these trading platforms, under our laws, they have to register with the Commission unless they meet an exemption. Make no mistake: If a lending platform is offering securities, it also falls into SEC jurisdiction."
Stablecoins, which side-step the traditional banking system and are now at the center of crypto trading, are also under the SEC authority.
"The use of stablecoins on these platforms may facilitate those seeking to side-step a host of public policy goals connected to our traditional banking and financial system: anti-money-laundering, tax compliance, sanctions, and the like," Gensler said.
The SEC is anticipating new filings in regards to crypto ETFs. Still, Gensler did not specify whether any bitcoin ETFs will be approved in the U.S. "We are seeing some progression in the funds space. We have some mutual funds. We anticipate to have some filings for ETFs," he said.
Gensler also highlighted SEC's work with custody and climate risks.
The SEC chairman once again described the crypto assets as highly speculative plays. He made a comparison to investing in gold and silver.
"If somebody wants to invest in gold or silver, that is also speculative play," he said. "Whether it is bitcoin or other crypto assets, if U.S. investors are getting exposure, then our role is to ensure investor protection."
What makes crypto potentially a national security threat is its use in ransomware attacks, Gensler added. "The use in ransomware [makes it a] medium of exchange," he said. "It is also being used to challenge sanctions and law enforcement and guarding against activities and tax complaints. It has been a challenge in many nations," he said.
Gensler's comments did not significantly impact the crypto space, but both bitcoin and ethereum were down more than 4% and 6%, respectively. At the time of writing, bitcoin was trading at just below $38,000 and ethereum just below $2,500.