Gensler: Investors are Not Protected When It Comes to Crypto

In prepared remarks during his testimony before the Senate Banking Committee Tuesday, Gensler said that emerging technologies pose risks to investors, and regulators cannot continue to look the other way.

article-image

Gary Gensler, Chairman, SEC; Blockworks exclusive art by Axel Rangel

share

key takeaways

  • SEC Chairman Gary Gensler appeared before the Senate Banking Committee Tuesday
  • Gensler said that more retail investors today are accessing the market than ever before, and there needs to be adequate resources for the SEC to protect investors

United States Securities and Exchange Commission Gary Gensler has big plans to shake up how Wall Street firms and the digital asset industry conduct business. 

In prepared remarks during his testimony before the Senate Banking Committee Tuesday, Gensler said that emerging technologies pose risks to investors, and regulators cannot continue to look the other way. 

“We just don’t have enough investor protection in crypto finance, issuance, trading, or lending,” Gensler said. “Frankly, at this time, it’s more like the Wild West or the old world of ‘buyer beware’ that existed before the securities laws were enacted. This asset class is rife with fraud, scams, and abuse in certain applications.”

Gensler said that more retail investors today are accessing the market than ever before. There needs to be adequate resources for the SEC to protect investors, Gensler said, mentioning that the SEC’s staff has decreased 4% since 2016. 

Senators have been divided over how to best address the growing cryptocurrency industry and increasing prominence of retail investors in the space. 

“In my mind, the SEC’s job is not to make retail investing more expensive or unpleasant or difficult,” said Sen. Pat Toomey (R-PA). “In America, adults investing their own money should be free to decide how to do so.” 

During the committee meeting, Sen. Elizabeth Warren (D-Mass.) pressed Gensler on Ethereum’s high gas fees which she said impact small investors. “In the face of these high, unpredictable fees, small investors can easily get jammed and wiped out entirely,” she said, adding, “Advocates say crypto markets are about financial inclusion but the people who are most economically vulnerable are the ones who are the ones who are going to have to withdraw their money the fastest when the market drops. Does this sound like the path to financial inclusion to you?”

As such she said regulators need to step up and ensure they are building the “inclusive financial system that we need.”

Loading Tweet..

During his remarks Gensler mentioned that Coinbase is not a registered entity, despite the fact that it lists “dozens of tokens that might be securities.” 

Coinbase’s lack of registration is an anchor on a company that otherwise has a market value of being a registered and compliant entity. The exchange also operates in Canada, and does not have a registration there either, according to records from the Canadian Securities Administrators. 

In a recent interview with Blockworks, Andrei Poliakov, the CEO of one of Canada’s only licensed exchanges Coinberry, said that lack of registration would be problematic for exchanges as they trade contracts for delivery — most users on exchanges don’t custody their own assets. 

“Coinbase trades securities — like us. They trade contracts for delivery. You’re buying a promise from us that you can withdraw the crypto when you want it,” he said. “There’s an underlying asset that’s not a security that supports the contract, but at the end of the day it’s a security.”

“Investors get to decide what risks they take, that’s up to investors,” said Gensler. “But Congress said that it should be based on full and fair disclosure.”

This story was updated on Sept. 14, 2021, at 1:31 pm ET.

Are you a UK or EU reader that can’t get enough investor-focused content on digital assets?Join us in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket. Buy it now.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates (1).jpg

Research

With $13B in tokenized assets, strong institutional partnerships, and a clear first-mover advantage in the RWA space. The platform's methodical approach to regulatory compliance, coupled with its hybrid public-private architecture, positions it uniquely to capture significant market share in the emerging tokenization landscape. While current fee generation primarily stems from metadata transactions, the planned launch of Figure Markets, major exchange listings, and comprehensive market-making initiatives in 2025 could serve as powerful catalysts for growth.

article-image

Perena is built on the premise that as stablecoins proliferate, liquidity could fragment, and stablecoins aren’t useful if they aren’t liquid

article-image

From hackathons to trading tools and DAO governance, AI agents are redefining how we build and innovate

article-image

CME’s large bitcoin contracts are so big that investors are turning to micro bitcoin contracts

article-image

The third-largest stablecoin is going multichain for the first time in its seven-year history

article-image

Nano Labs’ news release notes confidence in bitcoin being “a reliable store of value amidst its rising global adoption”

article-image

Several big companies report third quarter earnings this week, likely moving markets