- Newly-appointed SEC chairman Gary Gensler clarified that the agency does not have jurisdiction to regulate Bitcoin.
- The securities regulator is now urging Congress to make some key decisions around crypto regulation.
- Consumer protection could decrease fraud and manipulation on crypto exchanges.
The Securities and Exchange Commission (SEC) told US investors that they lack protections when they trade Bitcoin on cryptocurrency exchanges.
Only Congress can keep crypto investors safe
During a hearing held by the House Financial Services Committee, SEC chairman Gary Gensler highlighted that the trading of the leading cryptocurrency represents an oversight gap. Although the hearing was originally about the GameStop short squeeze, Rep. Mc Patrick Henry asked what the regulatory body would do to ensure that the cryptocurrency industry was “vibrant with legitimate money and under the rule of law.”
Despite the SEC’s authority to regulate digital assets that the agency considers securities, Bitcoin does not fall within that jurisdiction. Gensler said:
There’s a lot of authority that the SEC currently has in the securities space, and there are a number of cryptocurrencies that fall within that jurisdiction. But there are some areas, particularly Bitcoin trading on large exchanges, that the public is not currently really protected.
The securities regulator emphasizes that Bitcoin is a commodity under US law and is not subject to the SEC’s oversight. While testifying during the hearing, Gensler stated that the $2 trillion crypto market could benefit from greater investor protection. He added that Congress could consider bringing investor protection to crypto trading platforms. The SEC chair said:
It's only Congress that can really address it. It would be good to consider whether to bring greater investor protection to the crypto exchanges.
Given that digital asset exchanges do not have a regulatory framework provided by the SEC or the Commodity Futures Trading Commission (CFTC), Gensler suggested that Congress could “instill greater confidence.” Without a robust market regulatory oversight on crypto exchanges, Gensler argued that there is no protection against fraud or manipulation.
Gensler’s nomination was voted for by senate members last month, and the hearing on GameStop was his first appearance as SEC chair. The crypto community has been watching his term at the agency closely since Gensler has more extensive exposure and experience to digital assets than his predecessors.
In March, Rep. McHenry introduced a new bill called the Eliminate Barriers to Innovation Act, which intends to address unresolved questions about how regulations affect the cryptocurrency market. The bill has been passed by the US House of Representatives and is awaiting the Senate and President for further approval.