SEC asks Congress to help agency stake out regulatory ground in crypto

·2 min read

The Securities and Exchange Commission said Tuesday it hopes to stake out the space to regulate certain cryptocurrencies and crypto markets, but needs help from Congress first.

SEC Chairman Gary Gensler committed to “take our authorities as far as they go” to ensure investor protection, but said “gaps” exist in defining the SEC’s role in regulating the emerging technology.

“We need additional Congressional authorities to prevent transactions, products, and platforms from falling between regulatory cracks,” Gensler said in remarks at the Aspen Security Forum Tuesday. He also asked for “more resources” to staff up the SEC’s efforts on crypto.

Capitol Hill appears primed to at least listen to the SEC’s call to action. Last week, Virginia Democrat Don Beyer introduced legislation that would define which digital assets fall under the regulatory purview of the SEC and which ones fall under the purview of the Commodity Futures Trading Commission (CFTC).

Lawmakers are also spending time this week working through text in the infrastructure bill concerning the treatment of crypto brokers for tax reporting purposes.

Isaac Boltansky, a director of policy research at Compass Point, cautioned that Congress is unlikely to move immediately to set up the legal framework for regulatory oversight.

“At the moment there is insufficient consensus regarding these issues on Capitol Hill and the odds are against comprehensive digital asset legislation accordingly,” Boltansky told Yahoo Finance in an email.

He added that the Gensler speech was a reminder that "no singular regulatory entity will be able to respond with a holistic regulatory regime." 

Forthcoming reports from the Federal Reserve and a U.S. Treasury-led working group on crypto-related matters may lay out the roadmap for an interagency approach.

‘Make no mistake’

Still, Gensler’s remarks offer the deepest look at how he would like the SEC to monitor and enforce in the crypto space.

The SEC chairman warned crypto watchers to “make no mistake” in recognizing the agency’s jurisdiction over tokens sold as securities, trading platforms that allow the exchange of securities, and custody services.

Gensler expressed concern that many tokens and exchanges are currently unregistered, examples of “gaps” that he would like to work with Congress and other regulators in closing.

“Frankly, at this time, it’s more like the Wild West,” Gensler said, pointing to crypto scams and fraud that could, in some cases, present national security concerns as well.

Broadly, Gensler said he was not opposed to cryptocurrencies or the technology that underpin them. Gensler, who researched blockchain at the Massachusetts Institute of Technology prior to his SEC role, said he would like to install guardrails on the emerging asset class to protect investors.

“If somebody wants to invest, as they have in gold or silver, that might be a speculative play. But layer over that investor protection,” Gensler said. “I think that enhances economic activity.”

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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