U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler speaks with Senator Elizabeth Warren (D-MA) prior to testifying before a Senate Banking, Housing, and Urban Affairs Committee oversight hearing on the SEC on Capitol Hill in Washington, U.S., September 14, 2021.
Evelyn Hockstein | Reuters
WASHINGTON — Securities and Exchange Commission Chair Gary Gensler on Wednesday pushed back against criticism that the agency did not implement rules stopping malfeasance by cryptocurrency firms, resembling the illegal trading that led to the demise of crypto exchange giant FTX.
Gensler told Yahoo Finance in an interview that the SEC has brought greater than 100 enforcement cases within the crypto space, directly difficult lawmakers’ questions on the agency’s oversight.
In November, Sen. Elizabeth Warren, D-Mass., called on the SEC to “suit up” within the wake of the FTX failure, arguing the agency has “fallen behind” the crypto industry. Members of the House Financial Services Committee also called on Gensler to reply questions on what he knew leading as much as the FTX collapse.
“We’re already suited up,” Gensler told Yahoo Finance.
The SEC chief said cryptocurrency firms ought to be held accountable for compliance with existing rules.
“You may consider them because the casinos wherein the investing public is on the lookout for a greater future,” Gensler said. “And since most of those tokens are securities, that implies that the … casinos need to return into compliance with our time-tested laws.”
“Their business model at once is offering the general public, they are saying, an interest return in crypto … after which possibly trading against their customers, trading ahead of their customers, lending that out,” he said. “Anywhere else in finance, these conflicts are usually not allowed and so they’re separated out.”
Former FTX CEO Sam Bankman-Fried’s firm Alameda Research used billions of dollars in FTX customer assets for trading, a practice that Gensler said violates a federal statute. The corporate filed for bankruptcy Nov. 11, and Bankman-Fried stepped down as CEO, because the firm faced a liquidity crisis.
Bankman-Fried has denied committing fraud.
Lawmakers have observed that federal oversight of FTX was hampered because the corporate is headquartered within the Bahamas.
Gensler told Yahoo Finance that the SEC has successfully deterred other suspicious crypto firm activities. He cited charges against Poloniex and Coinbase for unauthorized operations as examples.
“We brought actions against crypto lending platforms including BlockFi, and we are going to proceed to be a vigorous securities regulator, but I actually do suggest to those intermediaries, these storefronts, these casinos, for those who wish, to return into compliance, work with the SEC to get into compliance, disaggregate these businesses,” he said.
Gensler said the SEC would take more enforcement actions if cryptocurrency exchanges won’t comply, but he didn’t elaborate on what those can be.
“We are able to use some exemptive authority to tailor things … but it surely’s to not drop the fundamental protections: separating out these businesses right into a separate exchange,” he said.
