In his remarks before Friday’s Financial Stability Oversight Council (FSOC) meeting, Gary Gensler, Chairman of the SEC, spoke about crypto regulation. Gensler said:
The securities laws are not incompatible with crypto markets. Investors are exposed to risks due to this volatile and speculative market.
He stressed that it was important to bring crypto securities tokens issuers and intermediaries into compliance.
The SEC chief stated that although the risks from crypto markets do not seem to have spread to traditional financial sectors, it is important to remain vigilant in order to protect against them.
Gensler and SEC were criticized for failing to prevent the collapse of crypto-exchange FTX. This is despite the fact that SEC staff had many meetings with former FTX CEO Sam Bankman Fried (SBF). After he was detained in the Bahamas, the securities watchdog charged bankman-Fried with fraud and his crypto exchange. U.S. U.S. Congressman Tom Emmer has asked Gensler for testimony before Congress regarding the cost of his regulatory failures in crypto.
Financial Stability Oversight Council’s Crypto Regulatory Recommendations
Friday’s 2022 annual report was also approved unanimously by the Financial Stability Oversight Council. Gensler stated that he supports the FSOC report and its recommendations in his remarks. According to the U.S. Treasury Department announcement, the report:
The Council stresses the importance of agencies continuing enforcement of existing rules and regulations that apply to the crypto-asset environment.
The Treasury noted that the Council had identified regulatory gaps in crypto activities. It recommended that legislation be enacted to give federal financial regulators rulemaking authority over the spot market crypto-assets not classified as securities. The Treasury also noted that it was necessary to address regulatory arbitrage. Crypto-asset entities provide services similar to traditional financial institutions, but without a comprehensive or consistent regulatory framework.
Two U.S. senators including Elizabeth Warren (D.MA) introduced a bipartisan bill to regulate cryptocurrency last week. According to crypto advocates, their bill, called the “Digital Asset Anti-Money Laundering Act”, is ‘the most direct assault on the personal freedoms and privacy of cryptocurrency developers and users we’ve ever seen’.