Gary Gensler has a message for people pouring money into crypto on promises of high returns: beware.
The U.S. Securities and Exchange Commission chief on Tuesday repeated his warnings over lending platforms. Gensler said investors need to be wary of claims of double-digit interest rates.
“They’re operating a little bit like banks,” he said in remarks delivered virtually at the RFK Human Rights Compass Summer Investors Conference. “I caution the public.”
Gensler didn’t mention any lenders by name. Since taking over in April 2021, he’s taken a tough line on crypto products that may fall under the agency’s purview and the platforms that they trade on.
Cryptocurrencies have plunged this week after the crypto lender Celsius Network said Monday that it was freezing withdrawals. Bitcoin, the largest coin, fell as much as 10% on Tuesday.
Lending products have been a particular sticking point with the regulator. Last year, Coinbase Global shelved plans to start one after the agency threatened to sue.
BlockFi, a popular crypto platform, in February agreed to pay $100 million to the SEC and state regulators over allegations it illegally offered a product that pays customers high interest rates to lend out their digital tokens. BlockFi didn’t admit or deny the allegations.
Sen. Elizabeth Warren, a Massachusetts Democrat, said on Tuesday that regulators and lawmakers needed to do more to crack down.
“Too many crypto firms have been able to scam customers with too-good-to-be-true claims about safe sky-high returns, leaving ordinary investors holding the bag while insiders make off with their money,” she said in an e-mailed statement.
Speaking later in the day on Tuesday at The Wall Street Journal’s CFO Network Summit, Gensler said that lawmakers should be careful not to write new crypto-focused laws that could unintentionally hamper to SEC’s ability to oversee other markets.
“There might be something done legislatively that undermines” existing rules for stocks or investment funds by creating different regulations for similar activities, he said.
— With assistance from Allyson Versprille.
