SEC Chairman Gary Gensler warns U.S. Congress about Risks tied to the Crypto Industry

Chairman Gary Gensler told a U.S. Congress committee that his staff is developing ideas for new rules or guidelines for the crypto industry.

Despite coming from a crypto-related background, U.S Securities and Exchange Commission (SEC) Chairman Gary Gensler has said the burgeoning industry needs to be regulated.

The cryptocurrency industry carries various risks for investors and challenges for securities regulators, SEC head Gary Gensler told the U.S. Financial Services and General Government subcommittee. He cited market volatility and new crypto products as examples of those problems.

He said the total market capitalization of the cryptocurrency market was $1.6 trillion at the beginning of the week after losing more than one-third of its value in less than two weeks. While BTC attracts the most attention, he noted that more than 80 crypto-assets have a market capitalization of $1 billion, and about 1,500 crypto-assets have more than $1 million. Earlier, Gensler told the U.S. House Financial Services Committee that increased regulation of cryptocurrency exchanges could help protect investors. Specifically, he suggested that a dedicated cryptocurrency market regulator would provide some protection against fraud and manipulation, two problems that the SEC often cites when rejecting applications for Bitcoin ETFs. Gensler reiterated his concerns and assumptions in his last statement:

“If you placed an order on an app, and you said, ‘Alright, I want to buy a stock,’ there are rules that protect you that somebody won’t use your order and get ahead of you. […] So, it’s trying to bring the similar protections to the exchanges where you trade crypto assets as you might expect at the New York Stock Exchange or Nasdaq.”

Gensler noted that even the current volatility of the cryptocurrency market is suspicious:

“In recent weeks, reported trading volume has ranged from $130 billion to $330 billion a day. However, these numbers are not verified or reported to regulators because crypto assets are traded on unregistered cryptocurrency exchanges. This is just one of many regulatory gaps in the crypto-asset markets”.

He also said that the SEC is ready to initiate enforcement action against market participants who fail to comply with federal securities laws. He said the regulator has already filed 75 such lawsuits against cryptocurrency companies, fining them $1.7 billion.

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