SEC Chair Gary Gensler wrote to Senator Elizabeth Warren agreeing that the cryptocurrency ecosystem needs additional regulatory oversight.
Warren has agreed to help the SEC boss with his plight of establishing a central authority in the crypto industry.
US Securities and Exchange Commission (SEC) Chair Gary Gensler and Senator Elizabeth Warren have joined forces in seeking regulatory clarity over the cryptocurrency industry. Gensler wrote to Elizabeth in a letter dated Aug. 5 saying:
“Right now, I believe investors using these platforms are not adequately protected.”
Of note, Gensler’s letter was in response to a July 7 request by the Massachusetts Democrat seeking cryptocurrencies’ regulatory clarity. She urged the agency to address the volatile digital currency markets and determine what actions Congress should take.
Additionally, the letter follows the approval of the Portman amendment which contains new tax-reporting requirements for crypto brokers. With the new requirements, the government could reportedly raise an estimated $28 billion in revenues over 10 years to fund infrastructure.
During his four-month tenure at the SEC, Gensler has been repeatedly sounding warning bells for crypto platforms. At the recently held Aspen Security Forum, he said the asset class is “rife with fraud, scams, and abuse.”
Crypto, according to Gensler
In his letter, the former blockchain professor kept up with this argument, specifically warning about stablecoins.
“These dollar-pegged cryptocurrencies may be used to go over traditional banking requirements propagating money laundering, tax non-compliance, sidestepping sanctions, and the like,” he noted.
Furthermore, virtual products giving synthetic exposure to underlying securities are all subject to securities law. Stock tokens and stable value tokens among others are, therefore, obligated to work within the securities regime, he wrote.
“We need additional authorities to prevent transactions, products, and platforms from falling between regulatory cracks,” Gensler said of DeFi and other crypto-related platforms, further disappointing crypto enthusiasts.
To date, the SEC has established itself as the key crypto watchdog, pursuing fraud-related and unregistered securities offerings lawsuits. Gensler pledged to continue applying the current law in similar cases. Tokens have to be registered as securities to make them subject to the disclosure rules and regulatory oversight, he added.
Warren’s Unwavering Support
Reportedly, Warren was gladdened by the SEC boss’ actions. Gensler’s letter reflected his agreement with her plea for the agency to exercise its full authority in financial risk management. She also commended the agency on identifying areas that Congress needs to grant additional regulatory authority. Furthermore, Warren promised to back the quest to bring more regulatory oversight over digital assets.
“Cryptocurrency is the wild west of our financial system and desperately needs rules of the road,” the Democrat said in a statement. “I’m going to continue to engage with the SEC and other federal regulators on this, and will work to close regulatory gaps through legislation.”
Importantly, Warren is a member of the Senate Banking Committee and is the chair of its Subcommittee on Economic Policy. She has called on the Financial Stability Oversight Council to use its authority in leading the development of a comprehensive and coordinated approach for crypto regulation.
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