The Securities and Exchange Commission is going to do all it can to further regulate cryptocurrency, but it needs broader authority from Congress to better protect investors, according to SEC Chairman Gary Gensler.
The SEC has "taken and will continue to take our authorities as far as they go," Mr. Gensler said Tuesday in prepared remarks before the Aspen Security Forum. But, he added, "We just don't have enough investor protection in crypto. Frankly, at this time, it's more like the Wild West."
While certain rules related to crypto assets are well-settled, such as the test to determine whether a crypto asset is a security, there are some regulatory gaps, Mr. Gensler said. "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."
Before he was sworn in as SEC chairman in April, Mr. Gensler was a professor at the MIT Sloan School of Management. He has taught classes and testified before Congress on cryptocurrencies and blockchain technology.
"This asset class is rife with fraud, scams and abuse in certain applications," he said in his speech. "There's a great deal of hype and spin about how crypto assets work. In many cases, investors aren't able to get rigorous, balanced and complete information."
Mr. Gensler outlined several areas the SEC will focus on in the coming years, including initial coin offerings. "I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight," he said. "This leaves prices open to manipulation. This leaves investors vulnerable."
Moreover, stablecoins, which Mr. Gensler characterized as crypto tokens pegged or linked to the value of fiat currencies, and "decentralized finance," or DeFi, platforms, will be areas of interest for the SEC, he added.
"Right now, large parts of the field of crypto are sitting astride of — not operating within — regulatory frameworks that protect investors and consumers, guard against illicit activity, ensure for financial stability, and yes, protect national security," Mr. Gensler said.
"Standing astride isn't a sustainable place to be," he added. "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."
