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- SEC Chairman Gary Gensler aims to cooperate with Congress to further regulate cryptocurrency exchanges.
- In a hearing, he asserted that the SEC wants to bring “similar protections” for users of crypto exchanges to those of stock exchanges.
- Gensler believes SEC is “under-resourced” in financial terms which is a big challenge for the agency.
U.S. Securities and Exchange Commission (SEC) new chairman Gary Gensler aims to work with Congress and other regulators to increase its oversight of cryptocurrency exchanges.
The relatively new SEC chairman, Gary Gensler, spoke at a hearing of the Financial Services and General Government subcommittee of the House of Representatives and said that the SEC is attempting to bring “similar protections” for users of cryptocurrency exchanges to those currently available at the New York Stock Exchange or the Nasdaq. He stated:
If you placed an order on an app, and you said, ‘Alright, I want to buy a stock,’ there are rules that protect you that somebody won’t use your order and get ahead of you. […] So, it’s trying to bring the similar protections to the exchanges where you trade crypto assets as you might expect at the New York Stock Exchange or Nasdaq.
Gensler, who happens to be an MIT crypto professor with a profound knowledge of cryptocurrency and blockchain technology, says regulators are needed to make sure exchanges don’t “front-run” orders. “Without a cop on the beat and some rules of the road, then market participants can front-run your orders,” Gensler explained.
In crypto, front running involves obtaining information of pending transactions, which are openly achievable on blockchains, and making a transaction ahead of its completion by bidding a higher gas price.
Crypto-Related Challenges Facing the SEC
The MIT professor also pointed out some of the hurdles that they face while regulating the cryptocurrency industry. He asserted that the SEC is “under-resourced” in financial terms when compared with some of the big players in the industry. “We only spend about 16% or 17% of our budget, about $325 million a year, on technology, which is less than probably some large firms spend in a month. Some of them even spend that much in two weeks,” he said.
Gensler showed concern regarding crypto lending platforms and decentralized finance (DeFi) platforms. According to him, these platforms “raise a number of challenges for investors and the SEC staff trying to protect them.” He added that the SEC welcomes comments on crypto custody arrangements from marker makers and broker-dealers.
Gensler’s appointment as the head of SEC was welcomed by the crypto community. Bearing in mind his deep knowledge of innovation, the crypto space expects him to implement a reasonable amount of regulation.