The chair of the Securities and Exchange Commissions says Congress needs to create a regulatory framework to oversee cryptocurrency exchanges in the U.S., because current laws don’t really put any regulator directly in charge of them.
The comments were some of SEC Chair Gary Gensler ‘s first statements on cryptocurrency regulation, and indicate that he has been looking at the holes in the government’s current oversight role. A new regulator, or an expanded role for current regulators, could affect companies like Coinbase Global (ticker: COIN). The crypto exchange interacts with several regulators, but its operations are governed by a patchwork of rules at the state and federal levels.
Gensler appeared on Thursday in front of the House Financial Services Committee, which has been holding hearings on trading in GameStop (GME) and other hot stocks. It was Gensler’s first hearing appearance since being confirmed to his position last month.
Rep. Patrick McHenry (R-NC) asked Gensler, “What steps can you outline to bring regulatory clarity so that we can have a vibrant digital asset marketplace with legitimate money and the rule of law?”
Gensler said the SEC is working on guidance for crypto custody, and then said that he thinks exchanges need more direct oversight.
He added that “only Congress that could really address it.”
“Right now the exchanges trading in these crypto assets do not have a regulatory framework, either at the SEC or our sister agency, the Commodity Futures Trading Commission,” he added. “That could instill greater confidence. Right now there’s not a market regulator around these crypto exchanges. And thus there’s really not protection against fraud or manipulation.”
Coinbase has gone through various regulatory reviews, including the SEC’s review of its stock listing last month. But exchanges have to make some decisions without public guidance from a regulator—including on issues such as whether to start trading a new cryptocurrency on its platform. A Coinbase executive said the company is ready to talk about regulations.
“We welcome conversations like this about how to get crypto regulation right,” Coinbase Chief Legal Officer Paul Grewal wrote on Twitter. “In fact, we’d welcome any chance to share our own experience at Coinbase with what works for consumers, users and law enforcement—and what doesn’t.”
Coinbase stock closed about 6% lower on Thursday, at $256.76.
The crpytocurrency exchange platform pushed back toward the end of the Trump administration at proposed Treasury Department regulations that would have made financial firms verify identity information when transferring money to and from unhosted crypto wallets, which allow people to store cryptocurrency outside an exchange.
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