Chairman of the US financial regulator calls on Congress for authorisation to police cryptocurrency trading, lending and platforms
The chair of the US Securities and Exchange Commission (SEC) has made an extraordinary plea to members of the US Congress.
According to the Guardian newspaper, Gary Gensler on Tuesday called on the US Congress for the SEC to be given the authority to regulate cryptocurrency trading, lending and platforms, which he called a “wild west” that was riddled with fraud and investor risk.
What makes this call unusual is that most regulators and central banks have until now opted for a hands off approach, and actively warned people of the dangers associated with the use of cryptocurrencies.
Gary Gensler, according to the Guardian, said on Tuesday that the crypto market involved many tokens that may be unregistered securities and left prices open to manipulation and millions of investors vulnerable to risks.
“This asset class is rife with fraud, scams and abuse in certain applications,” Gensler reportedly told a global conference. “We need additional congressional authorities to prevent transactions, products and platforms from falling between regulatory cracks.”
Gensler also reportedly said he would like Congress to give the SEC the power to oversee cryptocurrency exchanges.
He called on US lawmakers to give the SEC more power to oversee crypto lending and platforms like peer-to-peer decentralized finance (DeFi) sites that allow lenders and borrowers to transact in cryptocurrencies without traditional banks.
“If we don’t address these issues, I worry a lot of people will be hurt,” he said.
He pointed out 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”.
Gensler is a Democratic appointee who took the SEC helm in April, and his call to be given the power to regulate the industry will be closely examined, both in the US and aboard.
Gensler has previously said cryptocurrencies should be brought within traditional financial regulation.
Gensler’s comment about cryptocurrency stands in marked contrast to the way digital currencies are viewed by senior officials in developed nations, and even by senior US government officials.
In 2019 the chairman of the US Federal Reserve, Jerome Powell, said that Facebook’s Libra cryptocurrency project, “cannot go forward” until serious concerns were addressed.
In May this year the governor of the Bank of England (BoE), Andrew Bailey, said cryptocurrencies “have no intrinsic value” and people should only buy cryptocurrencies if they are prepared to lose all their money.
Bailey then went one step further and said cryptocurrencies and similar assets were a danger to the public.
“Crypto-assets,” as the central bank’s official labels bitcoin and the rest, present a danger to the public, Bailey told the British Parliament’s Treasury Committee.
It should be remembered that the Bank of England in September 2014 had warned that Bitcoin could pose a threat to financial stability in the UK should it see widespread adoption.
Bailey’s comments come amid wild fluctuations for Bitcoin and other cryptocurrencies, that has seen the digital currency value rise, fall, rise again to record highs, before crashing back down again following comments from well known figures such as Elon Musk, and crypto restrictions in China.
That said, the Bank of England and HM Treasury confirmed in April that the Chancellor, Rishi Sunak had asked them to look at the case for a new “Britcoin”, or central bank-backed digital currency.