Cryptocurrency exchanges should be regulated under investor-protection rules similar to those applied to stock and derivatives markets. This was stated by SEC Chair Gary Gensler at the Piper Sandler Global Exchange and FinTech conference, according to WSJ.
Gensler explained that, under the law, regulated exchanges must comply with rules that prevent fraud and ensure fairness for all market participants. However, platforms for trading digital assets do not have such standards.
“When you go to one of these exchanges, you cannot be sure how accurately the order book reflects bids and offers. You don’t actually know whether front-running is taking place. You don’t know whether some of the reported trades are real or fake,” said the regulator’s head.
According to the Federal Trade Commission, in Q4 2020 and Q1 2021 Americans lost more than $80 million to bitcoin scammers. Compared with the analogous six-month period, the amount of losses rose tenfold.
In the US Congress, concerns are shared. In June, the House Committee on Financial Services formed a working group on cryptocurrencies.
“For many centuries there has been no evidence that new financial and monetary systems can develop organically without regulation and produce good outcomes,” said Jim Himes, a member of the working group.
According to WSJ, cryptocurrencies in the United States evolved in an environment of near-absence of oversight. In 2014, Federal Reserve Chair Janet Yellen said that the central bank had no mandate to regulate bitcoin and similar assets.
The United States Treasury Department, which Yellen headed at the start of 2021, is considering expanding powers to regulate payment networks for some crypto assets. However, according to the report, these discussions are at an early stage.
The situation is complicated by the emergence of peer-to-peer trading platforms — decentralized exchanges that have little contact with traditional regulators.
According to the SEC and CFTC, some activities on such platforms (for example, derivatives trading) may be illegal. He explained that trading futures and other similar instruments should occur on regulated markets under the agency’s oversight.
“There are industry organisations that audit rules, but can you trust private companies to advocate for the public interest? Traditionally, that’s the government’s job,” he added.
In May, Gensler urged Congress to clarify the regulation of bitcoin exchanges .
Later, the SEC chief proposed to the legislative body to collaborate on developing a regulatory framework for such trading platforms.
In the same month, Gensler said federal financial regulators should be ready to bring cases related to cryptocurrencies and new technologies, to protect investors.
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