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Sen. Warren seeks answers from SEC chair Gensler on potential crypto exchange rules

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U.S. Senator Elizabeth Warren wants the chairman of the Securities and Exchange Commission, Gary Gensler, to weigh in on crypto exchange regulation — a possible prelude to more tangible action on this front in Congress.

In the letter, Warren — no stranger to criticism of the crypto ecosystem — said that her aim was "to request information regarding the Security and Exchange Commission’s (SEC’s) authority to properly regulate cryptocurrency exchanges and to determine if Congress needs to act to ensure that the SEC has the proper authority to close existing gaps in regulation that leave investors and consumers vulnerable to dangers in this highly opaque and volatile market."

Warren, in sum, wants Gensler to clarify, among other areas, whether the SEC needs more authority to regulate crypto exchanges. It's a notable area of inquiry, given that Gensler himself told Congress in May that he wants to work with Congress on this particular subject. 

"I do think that working with Congress, and I think it's only Congress that can really address it, it would be good to consider...whether to bring greater investor protection to the crypto exchanges," he said at the time. "And I think if that were to be the case, because right now, the exchanges trading in these crypto-assets do not have a regulatory framework either at the SEC or at our site agency, the [CFTC], that could instill greater confidence."

Warren's letter also honed in on decentralized finance — a topic other federal officials, including SEC commissioner Hester Peirce and CFTC commissioner Dan Berkovitz have spoken publicly about. A month ago, Berkovitz cited DeFi as a challenge for markets regulators like the CFTC, remarking that "federal regulators should become familiar with this new technology and its potential uses and be prepared to protect the public against misuse."

"Not only do I think that unlicensed DeFi markets for derivative instruments are a bad idea, I also do not see how they are legal under the CEA," he notably remarked.

Warren asked Gensler in her letter whether he agreed on that latter point, asking: "Do decentralized platforms raise similar investor and consumer protection concerns within the SEC’s jurisdiction? If so, what challenges does the SEC face in addressing these concerns?"

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