The head of the Securities and Exchange Commission told Sen. Elizabeth Warren that the cryptocurrency realm needs further regulation and that Congress should give the agency a corresponding rule-making authority.
SEC Chairman Gary Gensler told Warren, a Massachusetts Democrat, in a letter released Wednesday morning that he shared her interest in ensuring investor protection on cryptocurrency exchanges and emphasized that he doesn’t think that those investors are adequately protected right now. He said that the SEC has taken and will continue taking its regulatory authority as far as it’s permitted.
The letter was in response to a July inquiry by Warren in which she raised a number of concerns about cryptocurrency exchanges and platforms.
Gensler also addressed so-called stablecoins, which are a form of cryptocurrency that has their value tied to another asset class, such as gold or fiat currency. The SEC boss wrote that the existing stablecoin market is now worth some $113 billion and pointed out that, in July, nearly three-quarters of trading on cryptocurrency platforms occurred between a stablecoin and another token.
“The use of stablecoins on these platforms may facilitate those seeking to sidestep a host of public policy goals connected to our traditional banking and financial system: anti-money laundering, tax compliance, sanctions, and the like,” Gensler said.
Treasury Secretary Janet Yellen recently held a meeting with federal regulators to discuss the need to come up with plans to regulate stablecoins.
In her letter to Gensler, Warren expressed a number of concerns about digital assets, which have exploded in popularity in recent years. Bitcoin, the largest such cryptocurrency by market cap, has inflated from one coin being worth about $1,000 in early 2017 to over $45,000.
Warren said that during the six months from last October until this March, nearly 7,000 people reported losses from cryptocurrency scams, which resulted in $80 million in lost assets, 1,000% more in reported losses than the same period the year before.
Gensler said that he thinks the United States needs more resources to protect investors as cryptocurrency trading and transactions increase and that “additional authorities” are needed to ensure regulations are being followed.
“Regulators would benefit from additional plenary authority to write rules for and attach guardrails to crypto trading and lending,” he said. “We stand ready to work closely with Congress, the Administration, our fellow regulators, and our partners around the world to close some of these gaps.”
The letter follows a congressional battle over IRS tax reporting requirements in the cryptocurrency realm.
Cryptocurrency advocates say that language in the bipartisan infrastructure plan that expands IRS tax-reporting requirements in an effort to recoup billions in revenue could hurt blockchain software developers, cryptocurrency miners, and other parties.
A bipartisan group of senators attempted to amend the provision using unanimous consent by narrowing the definition of a “broker” in the bill, although the move failed after Republican Sen. Richard Shelby of Alabama blocked it following a dispute over additional military funding.
Despite the failure, the price of cryptocurrencies has been trending upward over the past week. Bitcoin was up more than 2% on Wednesday and hovering around $46,500, its highest level in months. Ethereum was up nearly 4%, and Ripple soared 11.6%.
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