- Warren requires Gensler to provide an outline of the current concerns regarding crypto exchanges prior to July 28.
- She asserted that the crypto market poses risks to both individual users and financial markets.
- Gary Gensler had previously stated that regulating crypto exchanges would be challenging to the SEC.
US Senator Elizabeth Warren recently warned that the “highly opaque and volatile” crypto market poses risks to both individual users and financial markets. She also called the lack of a regulatory framework in the crypto industry unsustainable.
Elizabeth, who presently chairs the Senate Banking Committee’s Subcommittee on Economic Policy, requested information from SEC Chair Gary Gensler regarding SEC’s authority to regulate crypto exchanges, through an open letter. Furthermore, the Massachusetts Democrat stated that if needed, Congress will “act to ensure that the SEC has the proper authority to close existing gaps in regulation.”
In recent years, the crypto exchanges increased in popularity as cryptocurrencies continued to gain more and more mainstream adoption. For instance, Coinbase, the most recognized crypto exchange in the US, has grown remarkably big. In the Q1 of 2020, the exchange had around $30 billion in trading volume, which expanded to a staggering $355 billion in the Q1 of 2021 — more than a 10x increase.
Warren stated that despite the recent surge in crypto adoption, the lack of a satisfactory regulatory framework poses a significant challenge. She said:
While demand for cryptocurrencies and the use of cryptocurrency exchanges have sky-rocketed, the lack of common-sense regulations has left ordinary investors at the mercy of manipulators and fraudsters.
Warren further added that the SEC must act fast to address these issues. “These regulatory gaps endanger consumers and investors and undermine the safety of our financial markets. The SEC must use its full authority to address these risks, and Congress must also step up to close these regulatory gaps,” she stated.
Warren asked the SEC Chair to provide an outline of the SEC’s findings regarding the current state of crypto exchanges — i.e. if they are currently operating in a “fair, orderly, and efficient” manner. She explicitly asked Gensler to provide answers to her questions prior to July 28.
Regulating Crypto Exchanges is a Challenge
Previously, SEC Head Had spoken of his intentions to further regulate crypto exchanges. He had asserted that the SEC aims to bring “similar protections” for users of cryptocurrency exchanges to those of stock exchanges.
However, Gensler pointed out numerous hurdles that the SEC encounters while striving to regulate crypto exchanges. For one, he said that the SEC does not have all the financial resources. “We only spend about 16% or 17% of our budget, about $325 million a year, on technology, which is less than probably some large firms spend in a month. Some of them even spend that much in two weeks,” he said.