If crypto lenders operate more like investment firms, they need to be registered as such, the head of the U.S. Securities and Exchange Commission (SEC) said Thursday (July 21).
Speaking to CNBC, SEC Chair Gary Gensler added that while large financial institutions are free to add cryptocurrency options to their client portfolios, the risks associated with crypto investing should be made public.
“We have focused on this area because many of these firms…may well be investment companies taking hundreds of thousands or millions of customers funds, pulling it together, and then relending it while offering pretty high returns,” said Gensler. “Sounds a little like an investment company, or a bank, you might say.”
He added: “How are they doing that? What stands behind those promises? We’re going to work with the industry to get these firms properly registered under the securities laws.”
Read more: SEC Seeks Funding to Take On Crypto Issues
Gensler’s comments came two days after the head of the SEC’s enforcement division told a House subcommittee he needs more people to handle the agency’s cryptocurrency actions — despite almost doubling the size of the unit in May.
Testifying for the House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, Gurbir Gerwal said enforcement actions against crypto companies are straining his resources, even though he hired 20 new positions — lawyers, investigators and analysts — to increase the staff of the Crypto Assets and Cyber Unit to 50.
When a member of the subcommittee, Rep. Sean Casten, D-Ill., asked whether Grewal had sufficient resources, the director suggested he would need more — a lot more.
“We’re making the best with the additional 20 slots,” he replied, “and then we’re hopeful to get the 125 additional slots we’ve asked for.”
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