Biden’s SEC pick: Some crypto markets ‘rife with fraud and scams’

·Reporter
·2 min read
Commodity Futures Trading Commission Chair Gary Gensler testifies at a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill July 30, 2013. REUTERS/Jose Luis Magana (UNITED STATES - Tags: POLITICS BUSINESS)
Commodity Futures Trading Commission Chair Gary Gensler testifies at a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill July 30, 2013. REUTERS/Jose Luis Magana (UNITED STATES - Tags: POLITICS BUSINESS)

Gary Gensler, President Joe Biden’s pick to head the Securities and Exchange Commission (SEC), told Congress Tuesday that the “greater challenge” in bitcoin and cryptocurrencies is protecting investors.

“Some markets have been really rife with fraud and scams,” Gensler told the Senate Banking Committee in his nomination hearing.

Gensler specifically pointed to some overseas markets, but did not elaborate on how exactly he would use SEC authority to create those protections.

Gensler is currently a professor at the Massachusetts Institute of Technology, where he focuses on blockchain technology and digital currencies. He formerly headed the Commodity Futures Trading Commission in the Obama administration, a position he was confirmed to in 2009 after a bipartisan 88 to 6 Senate vote.

In his hearing, Gensler added that bitcoin and other cryptocurrencies “have brought new thinking to payments and financial inclusion,” adding that he will also prioritize consumer protection with regard to the custody of digital assets

Other members of the Biden administration have appeared lukewarm to cryptocurrencies. Treasury Secretary Janet Yellen said last week that she did not feel bitcoin is “widely used as a transmission mechanism” and has concerns about the use of cryptocurrencies for illegal activities.

“To the extent it is used I fear it’s often for illicit finance,” Yellen said at a New York Times event. “It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.”

Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler testifies on Capitol Hill in Washington, Tuesday, July 30, 2013, before the Senate Banking Committee as lawmakers examine how to mitigate systemic risk in financial markets through Wall Street reforms.   (AP Photo/J. Scott Applewhite)
Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler testifies on Capitol Hill in Washington, Tuesday, July 30, 2013, before the Senate Banking Committee as lawmakers examine how to mitigate systemic risk in financial markets through Wall Street reforms. (AP Photo/J. Scott Applewhite)

Members of the Senate Banking Committee also questioned Gensler on the run up in GameStop stock prices, which raised questions about the relationship between zero-commission stock brokerages like Robinhood and wholesale market makers that execute the trades.

Gensler told Congress that he worries about the so-called “payment for order flow” structure. The nominee expressed concerns about the ability of a single market maker, Citadel Securities, to manage roughly 40% of retail flow.

“What does that do to the pricing of capital in this country? Those are important questions,” Gensler said.

Gensler committed to studying the issue but shied away from offering policy recommendations on the matter.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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