Dive Brief:
- Sen. Elizabeth Warren, D-MA, on Wednesday praised Securities and Exchange Commission Chair Gary Gensler’s efforts to rein in the crypto market, but said the regulator still needs to do more to bolster its scrutiny of the industry in an effort to fight fraud.
- In a speech at a virtual event hosted by the American Economic Liberties Project and Americans for Financial Reform, Warren said the SEC also needs more support from Congress, and called on other regulators to step up enforcement in the digital asset sector.
- Warren, a vocal critic of the crypto industry, has previously called on the SEC to exert more authority over the sector. Her remarks follow a November op-ed in The Wall Street Journal, where she encouraged the agency to “suit up” in its fight against crypto fraud.
Dive Insight:
“The commission has been loud and clear that crypto doesn’t get a pass for long-standing security laws that protect investors and ensure the integrity of our financial markets,” Warren said Wednesday. “This is the right approach —the SEC has the right rules, and the right experience, and Gary Gensler is demonstrating that he is the right leader to get the job done.”
Still, Warren added, the federal agency needs to “use the full force of its regulatory powers across the entirety of the crypto market.”
The remarks echo Warren’s November op-ed, in which she said the regulator has failed to wield its authority over the growing crypto industry.
“[P]ower is worthless if the cop on the beat won’t use it,” she wrote. “The SEC has brought some enforcement actions related to fraudulent and unregistered crypto offerings over the past few years, but it has fallen far behind as the crypto industry has drawn in millions of new investors.”
The responsibility to fight crypto-related fraud shouldn’t fall solely on the SEC, Warren said Wednesday, adding the sector was allowed unchecked growth under Trump-era regulators.
“Gensler faced a critical task to put the genie back in the bottle and bring the crypto ecosystem into regulatory compliance after Trump’s regulators had allowed it to explode,” Warren said. “The consequences of Trump’s regulators’ weakness were no surprise — by 2017, nearly 80% of all initial coin offerings [were] scams. The following year, investors lost about $9 million each day to crypto scams.”
Warren called on banking regulators to step up oversight of the space, referencing crypto-heavy bank Silvergate, which was forced this month to sell assets at a loss to cover roughly $8.1 billion in withdrawals after the collapse of crypto exchange FTX triggered a bank run.
“Our banking regulators are also part of this fight,” she said. “Already, crypto-friendly banks like Silvergate have opened the banking system up to greater risk, raising the specter of a crypto collapse in which American taxpayers are left holding the bag.”
Warren also called on Congress to provide the SEC with the resources needed to ensure it can regulate the crypto market.
“In the pockets of this market where regulators may not have the authority they need, Congress should give the tools to get the job done,” she said. “We can see the risks to financial stability, but in the dark recesses of the crypto world, the threat to our national security is growing.”
