SEC Chair: Congress Should Regulate Crypto Exchanges
Securities and Exchange Commission (SEC) Chairman Gary Gensler said he thinks the cryptocurrency market, now worth $2 trillion, needs more regulation, CoinDesk reported.
Gensler held his first public hearing since becoming head of the U.S. top regulator and said the SEC’s authority is restricted to securities and products or asset managers that may invest in crypto, according to CoinDesk.
However, he said Congress should consider taking a bigger role in bringing regulatory clarity to the proceedings, although he didn’t clarify what that might look like, CoinDesk reported.
“Right now, these exchanges do not have a regulatory framework at the SEC or at our sister agency, the Commodity Futures Trading Commission [(CTFC)],” he said, per CoinDesk. “Right now, there’s not a market regulator around these crypto exchanges, and thus, there’s really no protection around fraud or manipulation.”
These comments came in response to a question about digital assets from Rep. Patrick McHenry of North Carolina. Gensler’s reply also touched on proposed rulemaking for custody, which he said he hopes will go forward, according to CoinDesk.
McHenry has sponsored a bill which would address how the SEC and CFTC would divide the oversight of crypto. He asked Gensler how he would improve regulatory clarity, CoinDesk reported.
The hearing in question was held by the House Financial Services Committee in response to the frenetic stock trading environment from early 2021, in which meme stocks like GameStop and AMC were unexpectedly lifted above the bets placed on them by hedge funds, according to CoinDesk.
Gensler, speaking at the hearing, said technology “can bring greater access to our capital markets,” referencing sites like Reddit and the ways in which they can influence the markets, CoinDesk reported. But he said he didn’t want to curb free speech. He said he just wants to make sure malicious actors didn’t take part in this year’s stock market chaos.
In response to much money laundering involving cryptocurrency, PYMNTS found that 56 percent of exchanges didn’t have strong know your customer (KYC) processes, which has also become a focus of regulators recently as crypto’s role in the world is assessed.