The $2 trillion cryptocurrency market needs more investor protection in the U.S., including possible regulations for crypto exchanges, Securities and Exchange Commission (SEC) Chairman Gary Gensler said Thursday.

In his first public hearing since becoming the head of the federal securities regulator, Gensler said the SEC’s authority is restricted to securities and products or asset managers that might invest in cryptocurrencies. But he suggested Congress could take a role in bringing greater regulatory clarity, particularly around exchanges.

“Right now these exchanges do not have a regulatory framework at the SEC or at our sister agency, the Commodity Futures Trading Commission,” he said. “Right now there’s not a market regulator around these crypto exchanges and thus there’s really no protection around fraud or manipulation.”

Gensler did not specify what regulations around crypto exchanges could look like.

His comments, which came in response to a question about digital assets from Rep. Patrick McHenry (R-N.C.), also touched on a proposed rulemaking for custody, which the SEC chair said he hopes will move forward.

McHenry, who sponsored a bill addressing how the SEC and CFTC might divvy up oversight of crypto, asked how Gensler could improve regulatory clarity around digital assets.

GameStop

Thursday’s hearing was the third held by the House Financial Services Committee that looked at the regulatory response to the GameStop stock price jump earlier this year. 

Gensler did not address crypto in his pre-written opening remarks, instead focusing on aspects of the GameStop pump and other recent market events, such as the collapse of Archegos Capital. 

The new SEC chair did speak generally about technology and social media’s role in the public stock market.

“Technology can bring greater access to our capital markets,” Gensler said in his opening remarks. 

He mentioned the role of online communities like Reddit in boosting stock prices, but said he was not interested in curtailing free speech – rather, Gensler said he is interested in seeing whether malicious actors took advantage of these communities to manipulate markets.

The SEC plans to release a report this summer evaluating the GameStop frenzy and the reaction to it, Gensler said. 

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