Crypto industry “in fear of a strong SEC”: Sen. Elizabeth Warren

Massachusetts Senator Elizabeth Warren had harsh words for the crypto industry on Wednesday, calling on the US Securities and Exchange Commission to do more to combat crypto fraud. In prepared remarks delivered before the American Economic Freedom Project, Warren said industry players are “afraid of a strong SEC.”

“The SEC launched an enforcement action against celebrity crypto promoters for failing to disclose their compensation to the public. He prosecuted employees at exchanges such as Coinbase for insider trading. It accused crypto fraudsters of defrauding ordinary investors out of millions of dollars,” Warren said—adding that the agency was just getting started.

Various US agencies have waded into the cryptocurrency 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 host state agencies.

While some in the crypto industry would prefer to work with the CFTC, Warren said she believes the SEC and its chairman Gary Gensler are best suited for the job. She also praised the agency for blocking Bitcoin exchange-traded funds (ETFs) from entering the market.

“The commission has been loud and clear that crypto does not get a pass for longstanding 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 showing that he is the right leader to get the job done.”

While Warren praises Gensler, there are many people in the space, and even among Senator Warren’s colleagues in Congress, who question Gensler’s ability to do his job. The president has been accused of being soft on Sam Bankman-Fried and FTX and for what many call coercive regulation, arbitrarily picking who to go after and putting some companies out of business.

“The SEC must do more and use the full force of its regulatory authority across the entire crypto market,” Warren said, adding that Congress must bolster the agency with new resources and powers to ensure it can take on the industry with 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 agencies to go after 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 cited by regulators in calls to ban cryptocurrency.

Warren blamed regulators under former President Donald Trump’s administration for giving a premature green light to the crypto market, which she called “full of worthless tokens and unregistered securities, scams and Ponzi schemes, pumps and dumps, money laundering and sanctions evasion.” “

“The fallout from Trump’s regulatory weakness was no surprise — by 2017, nearly 80% of all initial coin offerings were scams,” she said. “In the following year, investors were losing about $9 million every day to crypto scams.”

Warren welcomed the SEC’s actions against companies that offer “dangerous and unregulated cryptocurrency lending products,” pointing to the recently bankrupt company BlockFi.

She also accused “crypto-friendly” banks like Silvergate of opening the banking system to a greater risk of a “crypto collapse,” which she says will leave American taxpayers holding the bag.

“The bank regulator’s job is to insulate the banking system and taxpayers from the risk of crypto fraud,” she said. “They have the tools and they have to use them.”

In December, Senator Warren took aim at self-custodial wallets, co-signing legislation with fellow US Senator Roger Marshall called the Digital Assets Anti-Money Laundering Act. The proposed legislation would establish know-your-customer (KYC) requirements for blockchain infrastructure providers and participants operating in the United States. This requirement would extend to decentralized network developers, miners and validators.

Warren’s remarks introduce a virtual panel discussion titled “Meeting the Crypto Challenge: Learning from the Crash.”

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