Massachusetts Sen. Elizabeth Warren had strong words for the crypto industry on Wednesday, urging the U.S. Securities and Exchange Commission to do more to stop crypto fraud. In prepared remarks to the American Economic Liberties Project, Warren said industry players are “terrified of a strong SEC.”
“The SEC has taken enforcement action against prominent crypto promoters for failing to disclose their compensation to the public. It has prosecuted employees of exchanges like Coinbase for insider trading. She has accused crypto crooks of cheating ordinary investors out of millions of dollars,” Warren said, adding that the agency was just getting started.
Various US agencies have waded into crypto’s waters along with the SEC, including the Commodity Futures Trading Commission (CFTC), the Federal Trade Commission (FTC), the Federal Deposit Insurance Corporation (FDIC), and the Department of Justice (DOJ). – not to mention a multitude of government agencies.
While some in the crypto industry would prefer to negotiate with the CFTC, Warren said she believes the SEC and its chairman, Gary Gensler, are best suited for the job. She also commended the agency for preventing bitcoin exchange-traded funds (ETFs) from entering the market.
“The Commission has said loud and clear that crypto does not get a passport to longstanding security laws that protect investors and ensure the integrity of our financial markets,” Warren said. “That’s the right approach — the SEC has the right rules and the right experience, and Gary Gensler shows he’s the right leader to get the job done.”
While Warren sings Gensler’s praises, there are many in the room, and even among Senator Warren’s colleagues in Congress, who question Gensler’s ability to get the job done. The chairman has been accused of sparing Sam Bankman-Fried and FTX, arbitrarily picking and choosing who to prosecute for what many call regulation through enforcement and putting some companies out of business.
“The SEC needs to do more and use the full force of its regulatory powers across the crypto market,” Warren said, adding that Congress needs to shore up the agency with new resources and powers to ensure it can take on the crypto market industry in full force.
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 needed.
Warren also called on environmental regulators to prosecute crypto miners whom she accused of driving up energy costs and polluting the environment. The environmental impact of cryptocurrency mining has long been an issue, with regulators citing calls to ban cryptocurrencies.
Warren accused regulators under former President Donald Trump’s administration of prematurely giving the green light to a crypto market she called “riddled with junk tokens and unregistered securities, carpet bars and pyramid schemes, pump and dumps, money laundering and sanctions evasion.” ”
“The fallout from Trump’s regulator weakness came as no surprise — by 2017 nearly 80% of all initial coin offerings were scams,” she said. “For the following year, investors lost about $9 million every day to crypto scams.”
Warren applauded the SEC’s actions against companies offering “dangerous and unregulated crypto lending products,” citing the recently bankrupt firm BlockFi.
She also accused “crypto-friendly” banks like Silvergate of opening the banking system to the greater risk of a “crypto meltdown,” which she says will keep American taxpayers in their pockets.
“It is the job of banking regulators to protect the banking system and taxpayers from the risk of crypto fraud,” she said. “They have the tools and they must use them.”
In December, Senator Warren targeted self-custody wallets and co-signed a bill called the Digital Asset Anti-Money Laundering Act with fellow US Senator Roger Marshall. The proposed legislation would impose know-your-customer (KYC) requirements on blockchain infrastructure providers and participants operating in the United States. This requirement would extend to decentralized network developers, miners and validators.
Warren’s remarks kicked off a virtual panel discussion titled “Confronting the Crypto Challenge: Learning from a Meltdown.”
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