New Securities and Exchange Commission (SEC) Chairman Gary Gensler remarked today that the agency “should be ready to bring cases involving issues such as crypto.”
Speaking at the 2021 Financial Industry Regulatory Authority (FINRA) Annual Conference, Gensler told the virtual conference attendees, “As we think about enforcement, to me, the idea is pretty simple: We need rules of the road and a cop on the beat to protect everyday investors and achieve our…mission.”
Yet Gensler, the former Commodity Futures Trading Commission chair who took over the SEC in April, understands that the “rules of the road” have yet to be firmly established.
On May 6, he suggested that a regulatory framework for crypto exchanges put in place by the CFTC and/or SEC would be a boon for consumer confidence and protection. “Right now, there’s not a market regulator around these crypto exchanges and thus there’s really no protection around fraud or manipulation,” he noted.
Gensler’s comments come as the market for digital assets such as Bitcoin, Ethereum, and Dogecoin have cooled down from their dizzying heights. After hurtling toward record levels, crypto markets crashed by upwards of 30% on Wednesday before recouping some of their losses today. Even assets such as Shiba Inu, not traded on licensed exchanges such as Coinbase or Gemini, have managed in the past month to accumulate multi-billion market caps, due to trading activity on decentralized exchanges that allow anyone to list a token.
Gensler’s colleague, SEC Commissioner Hester Peirce, has floated a “safe harbor” proposal for token projects. It would give startups that issue tokens three years before registering them as securities, theorizing that tokens can evolve over time away from investment instruments. Doing so would also give cover to cryptocurrency exchanges who list the tokens for trading.
Meanwhile, crypto custodians are facing their own regulatory upheaval. This week, Acting Comptroller of the Currency Michael Hsu triggered a review of the Treasury office’s cryptocurrency guidelines, while Senate Banking Committee Chair Sherrod Brown asked Hsu to put conditional banking charters to crypto firms on hold.
