U.S. Senator Elizabeth Warren on Thursday warned of the growing risks posed to consumers and financial markets by the “highly opaque and volatile” cryptocurrency market and blasted its lack of regulation as unsustainable.
Warren, a Democrat who chairs the Senate Banking Committee’s Subcommittee on Economic Policy, also raised her concerns in a letter to Securities and Exchange Commission (SEC) Chair Gary Gensler on Wednesday, in an effort that could help lay the groundwork for legislation to regulate the fast-growing market.
The former presidential candidate said she needed answers from Gensler by July 28 on the SEC’s authority to protect consumers investing and trading in cryptocurrencies, and determine what future congressional action was needed.
Cryptocurrencies reached a record capitalization of $2 trillion in April, but U.S. oversight of the market remains patchy.
“While demand for cryptocurrencies and the use of cryptocurrency exchanges have sky-rocketed, the lack of common-sense regulations has left ordinary investors at the mercy of manipulators and fraudsters,” Warren said in a statement.”These regulatory gaps endanger consumers and investors and undermine the safety of our financial markets. The SEC must use its full authority to address these risks, and Congress must also step up to close these regulatory gaps.”
Spokespeople for the SEC and Gensler did not immediately respond to a request for comment on Wednesday evening.
Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen have warned that cryptocurrencies pose risks to financial stability and suggested greater regulation may be warranted.
Officials from the Group of 20 major economies are also expected to discuss the issue when they meet in Venice this weekend.
Gensler, who became SEC chair in April, has said in the past that cryptocurrencies should be incorporated into the financial regulatory system but has yet to propose new rules.
In her letter to Gensler, reviewed by Reuters, Warren said cryptocurrency platforms lacked the same basic protections as traditional exchanges and noted that nearly 7,000 people reported a combined $80 million in losses from cryptocurrency scams in the six months to March 2021.
Demand for cryptocurrencies has surged over the past year with Coinbase, the largest cryptocurrency exchange in the United States, reporting 2021 first-quarter trading volume of $335 billion, a tenfold increase on the same period a year ago.
Warren asked Gensler to outline the ways in which cryptocurrency exchanges may be undermining the SEC’s mission to ensure that markets are operating in a “fair, orderly, and efficient manner,” whether additional protections were needed for investors, and whether international regulatory coordination was required.
“The lack of regulation to provide basic investor protections is unsustainable,” she added.