Securities and Exchange Commission Chairman Gary Gensler Tuesday called on Congress to grant the SEC more authority and resources to regulate the rapidly growing and volatile cryptocurrency sector.
The SEC has taken its authority as far as it can go and needs additional support from Congress to expand the agency's investors protection mandate, which traditionally has governed securities, so that it also addresses crypto trading, exchanges, lending and decentralized finance platforms, Gensler said in his remarks at the Aspen Security Forum.
Describing the crypto sector as “the Wild West,” Gensler said the crypto market involves many tokens, which may be unregistered securities, and leaves prices open to manipulation and millions of investors vulnerable to risks like fraud.
“We need additional Congressional authorities to prevent transactions, products and platforms from falling between regulatory cracks,” Gensler said. “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.”
As of Monday, crypto assets were worth about $1.6 trillion, with 77 tokens worth at least $1 billion each and 1,600 with at least a $1 million market capitalization, according to CoinMarketCap.
If Congress grants the SEC more authority to regulate crypto, it would be an unprecedented expansion of the agency's investor protection mandate, said Ken Joseph, head of Americas compliance and regulatory consulting at Kroll. Joseph was previously at the SEC, where he served as one of the inaugural supervisors in the Division of Enforcement’s specialized asset management unit, and as a senior officer in the commission’s Office of Compliance Inspections and Examinations.
Joseph said he expects a territorial struggle with the Fed if the SEC’s powers are expanded. “There could be a fight among the federal agencies about who should hold that power,” he said. “Other federal agencies that might have a stake in this fight might want their agendas to be addressed as well.”
While the SEC has operated well under its current limitations, Joseph said, the regulatory infrastructure has not kept pace with financial innovation and Gensler recognizes that.
“Standing astride isn’t a sustainable place to be,” Gensler said. “For those who want to encourage innovations in crypto, I’d like to note that financial innovations throughout history don’t long thrive outside of our public policy frameworks.”
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