U.S. senator Elizabeth Warren urged banking and environmental regulators to fight crypto fraud along with the Securities and Exchange Commission (SEC) in a speech on Jan. 25.
Warren said that during the past 12 months the crypto industry saw giants like Celsius and FTX collapse under the weight of their own “fraud, deceit, and gross mismanagement,” which has created an urgency to protect “honest investors” that are victimized.
The failure of these crypto firms has especially impacted Black investors and people from underbanked communities, Warren said, adding:
“Crypto fraud is a big problem, but it’s one we can fix. The solution starts with the SEC.”
Warren said that the regulators’ approach to crypto regulation has varied under different leadership. She added that during the administration of President Donald Trump, regulators gave a “green light” to junk tokens and unregistered securities, rug pulls, Ponzi schemes, pump-and-dump schemes, money laundering, and sanctions evasion.
However, Warren said with Gary Gensler at the helm, the SEC “has made a good start.”
The senator added that the SEC has held banks and public companies responsible for the risks of cryptocurrency custody. It has prevented the launch of Bitcoin exchange-traded funds that are “especially prone to fraud and market manipulation.”
The SEC has also tightened its grip against providing crypto lending services and brought a record-high number of enforcement actions over the past year.
The crypto industry is ‘scared’
The SEC is “ramping up” and the crypto industry is lobbying to escape regulatory oversight. Warren said:
“… the industry is scared of a strong SEC, and that’s why it’s spending millions of dollars each year lobbying to escape SEC oversight.”
Crypto players like to “outrun and outgun the regulators,” Warren claimed. But her focus is on ensuring “honest and fair financial markets,” she stated.
Warren said that applying securities laws to cryptocurrencies is the “right approach.” Crypto should be no exception to the principle of “same activity, same risk, same regulation,” she added.
Praising the SEC’s work under Gensler, Warren said that Gensler is proving to be the “right leader to get the job done.” But the SEC needs to further utilize its tools and power to enforce rules and rein in crypto frauds, she said.
Even as Warren praised Gensler, many have questioned his ability. In December 2022, New York Senator Ritchie Torres asked the U.S. Government Accountability Office to investigate the SEC’s failure to catch FTX’s alleged fraud before its collapse.
The SEC and Gensler also received flak from Minnesota Senator Tom Emmer, who said that Gensler should answer for the cost of his “regulatory failures” to Congress. Emmer even alleged that Gensler was aware of the fraud at FTX before its collapse.
Congress, banking, and other regulators need to join the fight
Warren said that Congress needs to ensure the SEC and other regulators have the resources and authorities needed to regulate “every corner of the crypto market.”
She added that environmental regulators like the Department of Energy and the Environmental Protection Agency need to force crypto miners to disclose their energy usage and environmental impact.
Additionally, she said that regulators need to step up and insulate the sector from fraud now that banks like Silvergate have opened up the banking sector to the risks of cryptocurrencies.
Warren added:
“With strong rules and enforcement from tough regulators, we can give the crypto industry a chance to prove whether it can deliver on its promises…”