SEC chair uses crypto enforcement in justification for FY2023 budget

Gary Gensler, Chair of the United States Securities and Exchange Commission, or SEC, has cited concerns about cryptocurrency enforcement in its budget request for the next fiscal year.

In written testimony for a Wednesday hearing of the U.S. House Committee on Appropriations, Gensler said he supported President Joe Biden’s request to budget more than $2.1 billion for the SEC in FY2023, allowing the regulatory body to increase its enforcement division by 50 people. The SEC chair cited concerns about the crypto space, referring to markets as “highly volatile and speculative,” as well as the need for “new tools and expertise” to address enforcement.

“The additional staff will provide the Division with more capacity to investigate misconduct and accelerate enforcement actions,” said Gensler. “It also will strengthen our litigation support, bolster the capabilities of the Crypto Assets and Cyber Unit, and investigate the tens of thousands of tips, complaints, and referrals we receive from the public.”

Addressing Michigan Representative Brenda Lawrence at the hearing, Gensler reiterated his view that “most” offerings from token projects fell under the SEC’s regulatory purview as securities and should be registered accordingly. According to the SEC chair, investors were currently “not well protected,” given the regulatory body’s limitations on enforcement: 

“We’ll use our enforcement tools to bring enforcement actions [against crypto trading platforms], but I prefer if they come in [...] We’re not trying to grow really significantly, but resources to grow at least six percent to grow our enforcement arm in this space.”

Gensler later added he wanted more funding to dedicate to issues related to the growing crypto space, citing 85-90 enforcement actions the SEC had brought against digital asset firms in the last year. He also referred to the recent price volatility of a crypto asset “that went from $50 billion of value to near zero just in the last three weeks,” possibly referring to TerraUSD (UST).

Related: SEC doubles down on crypto regulation by expanding unit

The recent volatility among major cryptocurrencies, including Bitcoin (BTC) and Ether (ETH) and following the collapse of Terra (LUNA), has caught the attention of more than a few regulators and lawmakers in the United States. On May 12, Treasury Secretary Janet Yellen addressed the House Financial Services Committee, including in her testimony that TerraUSD (UST) and Tether (USDT) depegging from the U.S. dollar was not a “real threat to financial stability” given the scale of the stablecoin market.