Securities and Exchange Commission Chairman Gary Gensler said that Congress should give his agency greater authority to regulate cryptocurrencies.
Gensler spoke about the digital assets during an appearance at the Aspen Security Forum on Tuesday. He said they lacked investor protections and branded the ever-growing cryptocurrency realm as a “Wild West” filled with fraud, scams, and abuse.
The SEC chief, who assumed office in April, previously taught classes in crypto finance and blockchain technology at the Massachusetts Institute of Technology.
“There’s a great deal of hype and spin about how crypto assets work,” he said. “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.”
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Gensler said that while the SEC has taken and will continue to take its regulatory authorities over cryptocurrencies “as far as they go,” there are still gaps in its powers.
“We need additional congressional authorities to prevent transactions, products, and platforms from falling between regulatory cracks,” he said. “We also need more resources to protect investors in this growing and volatile sector. We stand ready to work closely with Congress, the administration, our fellow regulators, and our partners around the world to close some of these gaps.”
The remarks come as Congress mulls new tax reporting oversight for cryptocurrencies as part of a proposed bipartisan infrastructure package. A revenue-raising provision in the plan would apply new IRS reporting requirements to cryptocurrency brokers, which lawmakers predict would bring in about $28 billion in revenue.
The cryptocurrency industry and some lawmakers have bucked the bill’s language out of fear that it is overly broad and could be interpreted to include not only centralized exchanges but also node operators, developers, and miners.
President Joe Biden’s Treasury Department has also pushed to regulate cryptocurrencies more thoroughly. Treasury Secretary Janet Yellen recently held a meeting with federal regulators to discuss the need to come up with plans to regulate stablecoins, a type of cryptocurrency that have their value tied to another asset class, such as gold or fiat currency.
Gensler touched on stablecoins during his Aspen Security Forum appearance as well. He said that the existing stablecoin market is now worth some $113 billion and expressed concerns that they could be used to evade public policy objectives.
“In July, nearly three-quarters of trading on all crypto trading platforms occurred between a stablecoin and some other token,” Gensler said. “Thus, the use of stablecoins on these platforms may facilitate those seeking to sidestep a host of public policy goals connected to our traditional banking and financial system — anti-money laundering, tax compliance, sanctions, and the like.”
Federal Reserve Chairman Jerome Powell also recently told lawmakers that it is “very important” to regulate such tokens.
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While the exact effect of Gensler’s Tuesday comments on the cryptocurrency market is unclear, any talk of regulation usually sends coins into the red.
After exceeding $42,000 on Sunday for the first time in weeks, Bitcoin was down 4% at about $37,900 on Tuesday afternoon following Gensler’s remarks. Ethereum dipped 6.5% and Ripple dropped 5.7%. All three also saw declines on Monday amid discussions of expanding reporting requirements through the infrastructure package.
