The chairman of the United States Securities and Exchange Commission (SEC), Gary Gensler, wants more supervision from cryptocurrency brokers.
While attending a hearing on the US House of Representatives financial services subcommittee, Gensler said the SEC is trying to bring exchange users “similar protections” to those that already exist for New York Stock Exchange (NYSE) investors and Nasdaq.
"Without a policeman on the reins and some traffic rules, market participants can anticipate their orders," explained Gensler, referring to a practice of front running, prohibited in conventional financial markets.
In the cryptocurrency market, front running means obtaining knowledge of pending transactions, which are public on the blockchain, and having another transaction executed before paying a more expensive fee.
SEC cites DeFi as a challenge
Gensler also said that the crypto market is expanding rapidly. "We've all heard about bitcoin, but there are more than 80 other tokens with a market value in excess of a billion dollars, and another 1,700 with more than a $ 1 million," he told the subcommittee.
The new data analysis would help the SEC to monitor the sector, but also “expand our resources”. In observations submitted to the committee, Gensler described cryptocurrencies as a “highly volatile and speculative asset class”, making oversight of trading platforms essential.
He pointed out that the volumes of exchanges reported recently ranged between $ 130 billion and $ 330 billion per day, but that the numbers are unreliable because they have not been audited and reflect the movements of unregistered brokers.
Among other challenges facing the SEC related to the sector, Gensler pointed to the cryptocurrency loan markets and the decentralized finance platforms (DeFi), which “raise a series of challenges for investors and for the SEC team that tries to protect them. them ”.
The agency, he added, is also seeking comment from brokers on cryptocurrency custody arrangements.
Gensler's appointment to the SEC leadership position was well received by many participants in the crypto space, as he has already taught a course on blockchain at MIT, as well as wrote an opinion article in 2019 describing cryptocurrencies and technology blockchain as a “catalyst for change”.
Since being confirmed as SEC chairman, Gensler has taken a more measured line on digital assets, telling the 2021 FINRA conference that the agency "should be ready to handle cases involving issues like cryptocurrencies."
He also highlighted the need for “traffic rules and a policeman on standby to protect day-to-day investors”, a line that surfaced in his testimony to the Chamber of Deputies.