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Gary Gensler stated that investors on crypto exchanges should get similar protection as that offered to investors at the New York Stock Exchange. He also noted that the SEC is financially under-resourced when compared to the big-tech players.
On Thursday, May 27, Gary Gensler, the newly appointed chairman of the US SEC called for the need to regulate the crypto exchanges. He also stressed the need for higher investor protection by increasing the oversight of crypto exchanges.
Gensler’s comments came while speaking at the Financial Industry Regulatory Authority’s annual conference. Gensler said:
”This is a quite volatile, one might say highly volatile, asset class, and the investing public would benefit from more investor protection on the crypto exchanges”.
The SEC Chairman also expressed his desire to work with different regulators and Congress to fill the investor protection gaps in the crypto markets. Gensler also pointed out that there are many other crypto tokens “non-compliant” with the securities laws. During a Wednesday hearing, the SEC Chairman said:
“I think that there’s gaps in our current system…there are many crypto tokens that do come under the securities laws, and our agencies are trying to enforce the laws but there’s thousands of tokens and we’ve only been able to bring seventy-five actions,(sic). I would think if we could work with Congress to try to bring investor protection where these – sometimes commodities, sometimes securities – are trading on the platforms”.
SEC Chairman on Challenges in Regulating the Crypto Industry
The SEC Chairman outlined some challenges that the regulator has to overcome in regulating the crypto industry. He noted that the SEC is “under-resourced” in financial terms when compared to other big industry players. “We only spend about 16% or 17% of our budget, about $325 million a year, on technology, which is less than probably some large firms spend in a month. Some of them even spend that much in two weeks,” he noted.
He added that crypto exchanges need to have similar investor protection as that offered on NYSE. “If you placed an order on an app, and you said, ‘Alright, I want to buy a stock,’ there are rules that protect you that somebody won’t use your order and get ahead of you. […] So, it’s trying to bring the similar protections to the exchanges where you trade crypto assets as you might expect at the New York Stock Exchange or Nasdaq,” explained he.
Gensler added that the SEC needs to refresh its rules on crypto marketing as well. He specifically mentioned the game-like feature on mobile apps offered by retail brokerages, robo-advisors and wealth management firms.
”We all know that there’s greater access and some real enhancement that can come from these mobile applications, but at the same time, we have to freshen up and ensure that our rule sets address it properly around the communications with the public,” noted Gensler.
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