Gary Gensler, head of the U.S. Securities and Exchange Commission (SEC), has told Congress that the crypto market needs more regulation to protect investors and asked for greater funding and authority.
SEC Chairman Gary Gensler, speaking to the U.S. Congress on May 26, said that the crypto market would need a “cop on the beat” to ensure investor protection.
The remarks made at the hearing signal that U.S. regulators are going to start enforcing stricter regulations on the market. He also asked for more funding and authority in regulating the crypto markets.
Focusing on crypto investor protection
Gensler joins several other prominent individuals in recent weeks in commenting about protecting investors. He told the House Committee on Appropriations that the regulator had only taken action 75 times against projects and assets that are operating as securities. He notes there are thousands of such assets out in the market, many of which do not comply with securities laws.
Furthermore, he said,
“We have the SEC trying to protect against fraud in manipulation [in the stock market]… Not so in the crypto world, and so it’s trying to bring the similar protections to the exchanges where you trade crypto assets, as you might expect on the New York Stock Exchange or Nasdaq.”
Gensler is referring to the wild west period of cryptocurrencies, which roughly began in 2017 during what many consider to be the first real crypto boom. Several new projects began appearing at the time, many of which had no working product, and some of which were demonstrable scams. Such incidents are pushing regulators towards the “cop on the beat” narrative.
Investor protection and market manipulation have been key concerns for the US government. Treasury Secretary Janet Yellen and Acting Comptroller of the OCC Michael J. Hsu have both made remarks that speak to the same worries.
Gensler himself said that the most pressing issue is poor supervision of crypto exchanges. On this subject, he told Congress that the agency would like to work with them to foster investor protection to the platforms, “where these sometimes-commodities, sometimes-securities are trading on the platform.”
US is gearing up for regulation
U.S. officials are clearly working towards a regulatory framework, especially with the current volatile period in the market. Alongside investor protection and market manipulation, authorities are also concerned about the financing of illicit activities. KYC/AML compliance is a growing trend in markets across the world.
However, U.S. officials have acknowledged the need for regulation that encourages innovation, so it’s not all doom and gloom. Gensler has taught crypto and blockchain at MIT and has noted that there are advantages to the technology.
It will be interesting to see who the U.S. tackles regulating the crypto market, as it’s likely to be looked at by other countries. As it stands, it looks as though the U.S. will take harsh action against any project that does not comply with its laws, while allowing for innovation — a semi-compromise.