Washington lawmakers and regulators continue to beat the drum for better crypto regulation, with the latest call coming from Senator Elizabeth Warren of Massachusetts, a powerful Democrat on the Banking Committee.
In a letter sent Wednesday to the Chairman of the Securities and Exchange Commission, Gary Gensler, Warren wrote to request information on the authority of regulators to regulate money exchanges. She asked if the SEC “has the appropriate authority to address current regulatory loopholes that leave investors and consumers vulnerable to the perils of this highly opaque market.”
Gensler’s reaction
His letter follows comments made by Gensler in recent months expressing concern about forums where Americans will buy and sell their bitcoin BTCUSD, 3.19%, ether ETHUSD, 4.17% or various other cryptocurrencies. He told a House allocation subcommittee in May that there was a “hole” in crypto regulation, arguing that crypto exchanges would be his top priority to address. those holes.
“We have the SEC trying to protect itself from manipulation fraud [in traditional exchanges],” Gensler said. “This is not the case with the crypto world and therefore it strives to provide the same protections for exchanges where you trade crypto assets, as you might expect on New York Stock Exchange or Nasdaq.”
In June, the head of the Commodity Futures Trading Commission, Dan Berkovitz, questioned whether decentralized peer-to-peer exchanges, also known as DeFi exchanges, are legal under US law or not. He said users of DeFi exchanges are not given the protections against fraud and manipulation that traditional financial institutions offer and are not working to prevent fraud or money laundering.
“Not only do I think unlicensed DeFi markets are a bad idea, but I also don’t see how legit they are,” says Berkovitz. US law “requires that futures contracts be traded on a designated contract market authorized and regulated by the CFTC.”
In his letter, Warren pointed out that as the volume of digital assets traded on these forums has grown exponentially in recent years, claims of loss from bad actors have increased.
“The damage to consumers from this highly regulated market is real and continues to increase in the absence of effective SEC regulations,” she wrote. “During the six-month period from October 2020 to March 2021, nearly 7,000 people reported losses [to the Federal Trade Commission] due to cryptocurrency scams, resulting in cumulative losses.” $80 million.” She added these numbers represent a 12-fold increase in the number of reports and 1,000% more reported losses compared to the same period a year ago.
Warren noted that “scams are especially increasing on DeFi platforms,” where “developers are often anonymous” and it is easier to commit scams when they raise money by selling digital assets “before disappearing with investment funds.
Senators asked President Gensler if he believed these exchanges were operating in a way that was “fair, orderly, and efficient.” effective” or not – the standard the SEC strives to promote for all US financial markets, and what help Congress needs to enforce this standard in all crypto markets. also asked whether more international coordination is needed on the regulation of cryptocurrency exchanges
The letter, as well as recent statements by other key lawmakers on supervisory committees Financial oversight in both the House and Senate, seems to indicate that Congress intends to keep the regulator in check when it comes to regulation of cryptocurrency exchanges.
