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The SEC wants extra energy from Congress to completely regulate crypto, Chair Gensler says

The SEC needs more power from Congress to fully regulate crypto, Chair Gensler says

Gary Gensler

Andrew Harrer | Bloomberg | Getty Images

Securities and Exchange Commission Chairman Gary Gensler said Tuesday that Wall Street’s top regulator needs Congress to grant it additional powers for overseeing a vast and ever-evolving cryptocurrency market.

Speaking about crypto at the Aspen Security Forum, Gensler said the SEC has “taken and will continue to take our authorities as far as they go.”

“Certain rules related to crypto assets are well settled. The test to determine whether a crypto asset is a security is clear,” he said. “There are some gaps in this space, though: We need additional congressional authorities to prevent transactions, products and platforms from falling between regulatory cracks. We also need more resources to protect investors in this growing and volatile sector.”

Gensler, who previously taught classes about blockchain and other financial technology at the Massachusetts Institute of Technology, has asked lawmakers to grant his agency the legal authority to oversee crypto exchanges.

He said many of the crypto coins were trading like assets and should fall under the purview of the SEC, which already has significant authority over digital assets.

Despite his deep knowledge of blockchain and cryptocurrencies, Gensler has made it clear that he intends to take a hands-on approach when it comes to new financial technologies. Capitol Hill has for months held hearings on how best to monitor the nascent market, now worth trillions, amid violent price swings and rapid growth.

Sen. Elizabeth Warren, for example, last week wrote to Treasury Secretary Janet Yellen to urge her to bulk up oversight efforts.

Warren, a member of the Senate Banking Committee and a longtime critic of the nation’s largest banks, pressed the Treasury secretary to use her powers on the Financial Stability Oversight Council to bring about a safer crypto market.

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“FSOC must act quickly to use its statutory authority to address cryptocurrencies’ risks and regulate the market to ensure the safety and stability of consumers and our financial system,” the Massachusetts Democrat wrote in a letter to Yellen. “As the demand for cryptocurrencies continues to grow and these assets become more embedded in our financial system, consumers, the environment, and our financial system are under growing threats,” she added.

Chief among regulators’ concerns about crypto are its susceptibly to fraud and market manipulation.

The Federal Trade Commission reported earlier this year that consumers reported losing more than $80 million to crypto scams between October and March, with many of those losses stemming from underhanded scammers targeting small investors on social media, the FTC said.

“The American public is buying, selling, and lending crypto on these trading, lending, and DeFi [decentralized finance] platforms, and there are significant gaps in investor protection,” Gensler said. “Make no mistake: To the extent that there are securities on these trading platforms, under our laws they have to register with the commission unless they meet an exemption. Make no mistake: If a lending platform is offering securities, it also falls into SEC jurisdiction.”

Gensler on Tuesday did not offer comment on the potential for approving a bitcoin exchange-traded fund, a pending decision that many in the crypto market are anxiously awaiting.

Investors are closely following the status of an application by VanEck to list shares of its Bitcoin Trust on the Chicago Board of Exchange’s BTZ Exchange. Regulators said in a letter dated June 16 that they would take additional time to seek comments from the public.

Bitcoin was last seen trading at $38,200, but has been volatile in recent months and in late July dipped below $30,000.

Republican SEC Commissioner Hester Peirce, known for advocating somewhat easier regulation of digital assets, told CNBC last month that she’s frustrated with how slow the regulator has been to approve such an ETF.

Denying bitcoin ETF applications not only runs the risk of a double standard but also may leave thousands of investors with few, more-dangerous alternatives, Peirce said.

“The complications of not approving [an application] become stronger, because people are looking for other ways to do the same kinds of things that they would do with an exchange-traded product,” she said. “They’re looking at other types of products that aren’t as easy to get in and out of, they’re looking at companies, perhaps, that are somehow connected with bitcoin or crypto more broadly.”

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Politics

Home GOP elects Elise Stefanik to exchange Liz Cheney as convention chair

House GOP elects Elise Stefanik to replace Liz Cheney as conference chair

Representative Elise Stefanik (R-NY) smiles after the House Republicans elected her to chair the conference on May 14, 2021 at the U.S. Capitol in Washington, DC.

Almond Ngan | AFP | Getty Images

House Republicans voted Friday to make Rep. Elise Stefanik their conference chair, days after they called Rep. Liz Cheney for her opposition to former President Donald Trump’s continued influence on the party and her condemnation of his “big lie”, that the 2020 election had been rigged.

The Republicans met at around 8:30 a.m. ET at the Congress Visitor Center, the same room where they voted Cheney off the No. 3 position two days earlier.

The vote for Stefanik was carried out by secret ballot. The final balance was 134-46.

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Stefanik, a fourth-term New York State Congresswoman, gained national attention and clout in her party in 2019 when she forcibly defended Trump during his first impeachment trial.

“My focus is on unity because the American people and our voters deserve it,” Stefanik told reporters after the vote.

She thanked Trump for approving her role over Cheney and called the former president “a critical part of our Republican team.”

Cheney was denounced within her party for refusing to blow up Trump for spreading unsubstantiated conspiracy theories about his loss of election to President Joe Biden.

While federal officials said there was no widespread electoral fraud and dozens of lawsuits by Trump’s allies did not reverse a state’s election results, Trump has nonetheless refused to concede Biden. The former president continues to falsely claim that he won the election and that it was “stolen” from him.

Cheney blames Trump directly for invading a group of his supporters on January 6th in the Capitol. She was one of only 10 Republicans to vote for inciting an uprising against Trump in the House, and since that vote she has continued to argue that if the Republican Party fails to condemn Trump, Trump is a threat to the country. Trump was acquitted in the Senate.

Trump “risks further violence,” said Cheney on the eve of the vote on the House floor to remove her leadership role. He “continues to undermine our democratic process and sow doubts as to whether democracy works at all,” she said.

Stefanik was endorsed by Trump and House Republican leaders Kevin McCarthy and Steve Scalise, both of whom pointed out that Cheney’s focus undermined the GOP’s goal of reclaiming the House in 2022.

While Stefan’s status as the front runner on Cheney’s job has never been questioned, some conservatives have complained that the less experienced congresswoman was not conservative enough for the job.

She faced a last-minute challenge from Texas MP Chip Roy, supported by MP Ken Buck, of Missouri, and has been criticized by some conservative groups.

“Elise Stefanik is NOT a good spokesperson for the House Republican Conference,” the conservative Club for Growth tweeted last week. “The Republicans in the House should find a Conservative to run the news and win back the majority of the House.

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S.E.C. Chair Gensler Emphasizes Transparency in Markets

S.E.C. Chair Gensler Emphasizes Transparency in Markets

Gary Gensler puts market transparency and the need to understand the impact of new technology high on his priority list as the new chairman of the Securities and Exchange Commission.

“I think transparency is at the heart of efficient markets,” said Gensler on his first Capitol Hill testimonial as the country’s top securities cop.

Speaking from his living room, Mr. Gensler video appeared before the House Committee on Financial Services to discuss the SEC’s response to the tumultuous trading of GameStop stock in January. The massive surge in the video game company’s stock price was fueled by retail investors who bought their stocks through Robinhood and other commission-free trading apps, and banded together on social media to inflict huge losses on a hedge fund that had bet on GameStop stocks would fall. Some investors who bought GameStop stock at peak times later lost money.

Mr Gensler said SEC officials were working on a report addressing the issues raised by the episode, which will be released this summer. He also said new rules might be needed for brokerage apps that turn stock trading into a game or competition, a method called gamification.

“Through gamification, you are using psychological props to get people to act more,” Gensler said. Apps that encourage easy trading are part of a wider financial transformation where new technologies have opened markets to ordinary investors, but they also bring new risks, he said.

Mr. Gensler used his appearance to speak on other issues facing the markets and Wall Street. He said the SEC needs to “lean in” to ensure that traders, corporations and others are not using social media to manipulate the markets. Mr Gensler said he plans to work with Congress to develop a strategy to regulate the exchanges on which cryptocurrencies are bought and sold.

Legislators took the opportunity to invite Mr. Genslers’ views on a number of other issues, including whether companies should be required to disclose the environmental impact of their business and whether new regulations are needed for business development companies.

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May 6, 2021, 11:23 a.m. ET

Mr Gensler, 63, reminded lawmakers that he was only his third week on the field and that while he had many things on his to-do list, he had some catching up to do on topics the SEC had already been working on.

In his prepared testimony, Mr Gensler said the staff who prepared the report on GameStop were also looking into whether professional investors who bet that stocks will fall – meaning keeping them short – should be required to disclose .

Mr Gensler said the collapse of Archegos Capital Management, which caused Wall Street banks to lose more than $ 10 billion, has led regulators to consider whether traders should be required to disclose derivatives – the financial trading instruments which allowed Archegos to take massive positions in stocks without attracting any attention. Much of Archegos’ losses was attributed to the company’s heavy investment in total return swaps, a type of heavily leveraged derivative that can allow a trader to get exposure to a stock without actual ownership.

Mr Gensler’s tenure got off to a rocky start after Alex Oh, his enforcement director election, was forced to step down just days after his appointment because Paul, Weiss, the major law firm she had worked for, faced potential sanctions in a case in which she was heavily involved.

The hearing with Mr. Gensler was the third and last to deal with GameStop and the frantic trading in the House Financial Services Committee’s markets. The first hearing was held on February 18, when GameStop’s shares were trading around $ 40 per share after falling from a high of $ 347 per share. Since then, the stock has risen again, rising nearly 300 percent to $ 160 per share.