U.S. Sen. Elizabeth Warren (D-MA) is seeking information from the Securities and Exchange Commission (SEC) on its authority to regulate cryptocurrency exchanges.
In a letter to SEC Chair Gary Gensler, Warren said that cryptocurrency exchanges lack the same types of basic regulatory protections as traditional securities exchanges like the New York Stock Exchange or Nasdaq. She pointed out that between October 2020 and March 2021, nearly 7,000 people reported losses from cryptocurrency scams, resulting in a cumulative $80 million in losses.
“While demand for cryptocurrencies and the use of cryptocurrency exchanges have skyrocketed, the lack of common-sense regulations has left ordinary investors at the mercy of manipulators and fraudsters,” Warren, chair of the Senate Banking, Housing, and Urban Affairs Committee’s Subcommittee on Economic Policy, wrote to Gensler. “These regulatory gaps endanger consumers and investors and undermine the safety of our financial markets. The SEC must use its full authority to address these risks, and Congress must also step up to close these regulatory gaps and ensure that every investor has access to a safe cryptocurrency marketplace.”
As demand for cryptocurrencies has grown in recent years, the amount of trading activity on cryptocurrency exchanges has also increased. The volume of trading on Coinbase, the largest cryptocurrency exchange in the United States, grew from $30 billion in the first quarter of 2020 to $335 billion in the first quarter of 2021.
Warren asked Gensler in the letter to outline how cryptocurrency exchanges may be undermining the SEC’s mission to ensure that markets are operating in a “fair, orderly, and efficient manner.” She also wanted to know whether the characteristics of assets traded on cryptocurrency exchanges may warrant additional protections for investors and consumers relative to those provided for traditional exchanges.
In addition, the Massachusetts senator asked Gensler how the SEC’s authority to regulate crypto exchanges may differ from its authority to regulate traditional exchanges. Also, Warren wanted to understand the extent to which international regulatory coordination may be needed and what concerns decentralized finance may raise for the SEC’s jurisdiction.