SEC chief signals possible enforcement action against unregistered crypto exchanges

Most cryptocurrencies fall under the jurisdiction of SEC and exchanges dealing with them must register with the agency. That view was voiced by regulator Gary Gensler at a hearing in the U.S. Congress.

“Crypto exchanges must come in and register. Or, frankly, we intend to use the powers Congress gave us for enforcement and oversight,” he said.

Gensler did not agree with the remark that the agency had not established clear legal norms for the crypto industry.

“I think the rules are, in fact, quite clear: if you raise money from the public, and the public expects profits from the efforts of those you sponsor, there must be guarantees,” said the chairman of the SEC.

At the same time, Gensler acknowledged that Bitcoin, like some other cryptocurrencies, may be “commodity tokens”, falling under the regulation of the CFTC.

The hearings were devoted to the SEC’s budget for the next year. Gensler asked for increased funding, arguing that it was necessary, among other things, to strengthen oversight of the digital assets industry.

“I would like us to have more capacity to devote to this,” the official noted.

As an example of the need for investor protection in the sector, he cited an unnamed crypto project, “whose value has fallen from $50bn to zero in just the last three weeks.” It is presumed Gensler was referring to the Terra crash.

Gensler told lawmakers that at his agency, with a staff of about 1,300, just over 50 employees work on cryptocurrencies after the recent expansion of the division by 20 positions.

Earlier, speaking at the annual conference of financial regulators in Washington, the head of the SEC said that there is much to do in cooperation with the CFTC to improve the protection of crypto investors.

Head of the CFTC Rostin Behnam, in addressing participants at the Chainalysis Links conference, said the agency would devote additional resources and efforts to examining cases of fraud and manipulation involving digital assets. According to him, the regulator is facing a rising number of such cases, The Wall Street Journal reported.

In January, Gensler designated cryptocurrency exchanges as a major focus in tightening oversight of the industry.

In April he urged tighter oversight of trading platforms and stablecoin issuers.