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Massachusetts Senator Elizabeth Warren had strong words for the crypto industry on Wednesday, calling on the U.S. Securities and Exchange Commission to do more to fight crypto fraud. In prepared remarks delivered before the American Economic Liberties Project, Warren said industry players are “scared of a strong SEC."
“The SEC has brought enforcement actions against celebrity crypto promoters for not disclosing their compensation to the public. It has gone after the employees at exchanges like Coinbase for insider trading. It has charged crypto crooks for defrauding ordinary investors out of millions of dollars,” Warren said—adding that the agency is just getting started.
— American Economic Liberties Project (@econliberties) January 25, 2023
Various U.S. agencies have waded into the waters of crypto along with the SEC, including the Commodity Futures Trading Commission (CFTC), Federal Trade Commission (FTC), Federal Deposit Insurance Corporation (FDIC), and Department of Justice (DOJ)—not to mention a multitude of State agencies.
While some in the crypto industry would prefer to deal with the CFTC, Warren said she believes the SEC and its chair Gary Gensler are best suited for the job. She also praised the agency for blocking Bitcoin exchange-traded funds (ETFs) from hitting the market.
“The commission has been loud and clear that crypto doesn’t get a pass for long-standing security laws that protect investors and ensure the integrity of our financial markets,” Warren said. “This is the right approach—the SEC has the right rules, and the right experience, and Gary Gensler is demonstrating that he is the right leader to get the job done.”
While Warren sings Gensler’s praises, there are many in the space and even among Senator Warren’s colleagues in Congress who question Gensler’s ability to do his job. The chairman has been accused of going easy on Sam Bankman-Fried and FTX and for what many call regulation by enforcement, arbitrarily picking and choosing who to go after and driving some firms out of business.
“The SEC needs to do even more and use the full force of its regulatory powers across the entirety of the crypto market,” Warren said, adding that Congress needs to shore up the agency with new resources and authority to ensure it can take on the industry at full strength.
Warren pointed to the collapse of several crypto companies, including Celsius, FTX, Voyager Digital, and Three Arrow Capital, in 2022 as another reason why the SEC and broader regulation are necessary.
Warren also called upon environmental agencies to go after crypto miners, who she accused of driving up energy costs and polluting the environment. The environmental impact of mining cryptocurrency has long been an issue that regulators cite in calls to ban cryptocurrency.
Warren blamed regulators under the administration of former President Donald Trump for giving the premature green light to a crypto market that she called “full of junk tokens and unregistered securities, rug poles and Ponzi schemes, pump and dumps, money laundering, and sanctions evasion.”
“The consequences of Trump’s regulator’s weakness were no surprise—by 2017, nearly 80% of all initial coin offerings are scams," she said. "The following year, investors lost about $9 million each day to crypto scams."
Warren applauded the SEC’s actions against companies offering “dangerous and unregulated crypto lending products,” pointing to the recently bankrupt firm, BlockFi.
She also accused “crypto-friendly” banks like Silvergate of opening the banking system up to the greater risk of “crypto collapse,” which she says will leave the American taxpayers holding the bag.
“It’s the bank regulators’ job to insulate the banking system and taxpayers from the risk of crypto fraud,” she said. “They have the tools, and they need to use them.”
In December, Senator Warren took aim at self-custody wallets, co-signing a bill called the Digital Asset Anti-Money Laundering Act with fellow-U.S. Senator Roger Marshall. The proposed legislation would place know-your-customer (KYC) requirements on blockchain infrastructure providers and participants operating in the United States. This requirement would extend to developers of decentralized networks, miners, and validators.
Warren's remarks prefaced a virtual panel discussion titled, "Confronting the Crypto Challenge: Learning From a Meltdown."