Elizabeth Warren warns crypto ‘scams continue to surge’ on exchanges, calls for SEC regulation


Washington lawmakers and regulators continue to beat the drum for more cryptocurrency regulation. The latest call comes from Massachusetts Senator Elizabeth Warren, the powerful Democrat on the Senate Banking Committee.

In a letter to the chairman of the Securities Exchange Commission, Gary Gensler, Warren wrote on Wednesday to request information about the regulator regulating cryptocurrency exchanges. She asked whether the SEC “has adequate authority to close existing regulatory loopholes that are making investors and consumers vulnerable to danger in this very opaque market.”

Her letter follows comments from Gensler over the past few months expressing concern about the forums Americans are buying their bitcoins and selling BTCUSD, -0.73%,
Ether ETHUSD, -2.28% or other digital currencies. He told a budget subcommittee in May that there were “loopholes” in the regulation of cryptocurrencies, arguing that crypto exchanges would be his first priority in addressing those shortcomings.

Continue reading: The SEC chairman says Americans need a “cop on the beat” to protect investors from crypto scams

“We have the SEC trying to protect itself from tampering [in traditional stock exchanges,]”Said Gensler. “Not so in the crypto world, so it tries to provide the exchanges where you trade crypto assets with similar protection that you might expect on the New York Stock Exchange or Nasdaq.”

In June, Commodity Futures Trading Commission chief Dan Berkovitz raised the question of whether decentralized peer-to-peer exchanges, also known as DeFi exchanges, are legal under US law. He said that DeFi exchanges users are not being offered the same fraud and tampering protections as traditional financial institutions and they are not working to prevent fraud or money laundering.

“Not only do I think unlicensed DeFi markets are a bad idea, I also don’t see how they are legal,” said Berkovitz. US law “requires that futures contracts be traded on a contract market licensed and regulated by the CFTC”.

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In her letter, Warren pointed out that the volume of digital assets traded on these forums has grown exponentially in recent years, and complaints of losses due to bad players have increased.

“The harm to consumers from this under-regulated market is real and will continue to grow in the absence of effective SEC regulations,” she wrote. “In the six-month period from October 2020 to March 2021, almost 7,000 people reported casualties [to the Federal Trade Commission] of cryptocurrency fraud, resulting in an accumulated loss of $ 80 million. ”Those numbers, she added, represent a twelve-fold increase in the number of reports and 1,000% more reported losses than in the same period last year.

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Warren noted that “there has been an increase in scams, particularly on DeFi platforms,” ​​where “developers are often anonymous,” and are more likely to conduct scams where they raise money selling a digital asset “before disappearing with investor money.

The Senator asked Chairman Gensler to report on whether he believed these exchanges are “fair, orderly, and efficient” – the standard the SEC promotes for all US financial markets and the help he needs from Congress Implement this standard in all cryptocurrency markets. She also asked if more international coordination was needed in regulating crypto exchanges.

The letter, along with recent statements from other major lawmakers on financial oversight committees in both the House and Senate, appears to signal that Congress is keen to keep the regulator’s feet on the fire when it comes to regulating crypto exchanges.