Senator Prompts Regulators to ‘Do More’ to Combat Crypto Scams and Fraud

The chairman of the Senate Banking Committee called out the risks of crypto on Thursday, expressing a need from regulators to protect the public from scams and fraud.

“Bitcoin can be used for old-time schemes and frauds like Ponzi schemes and bogus investments, promising big returns with only upside and no risk,” said Senator Sherrod Brown (D-OH). “New ways to cheat people out of their money is not the kind of innovation most people want in our economy.”

The chairman of the Senate Committee on Banking, Housing, and Urban Affairs made the comments at a hearing, titled “Protecting Investors and Savers: Understanding Scams and Risks in Crypto and Securities Markets.” He pointed out how investors were harmed in the collapse of lending platforms like Celsius and Voyager Digital that offered substantial yields on crypto deposits.

“In the last two months, we’ve witnessed spectacular blowups in the crypto markets, exposing both the alarming interconnectedness and the enormous risks among crypto firms,” he said. “Consumers and investors were misled with promises that their crypto would earn double-digit interest rates in perpetuity.”

Brown said the committee “will push [U.S.] regulators to do more” as the public becomes more aware of the risks involved in cryptocurrency investments, referencing the Securities and Exchange Commission (SEC), banking regulators, and adding that the “industry shouldn’t be allowed to write the rules they want to play by.”

Patrick Toomey (R-PA) was also in attendance and criticized the SEC for not showing up to the meeting, in light of recent bankruptcies from crypto lenders. Toomey claimed the lack of a presence from SEC Chair Gary Gensler or any of his subordinates likely put a strain on some members of the public who lost access to their money as the firms went under.

Gensler’s absence is “little comfort to the thousands of Americans who lent their crypto to Celsius and Voyager,” he said. “What was the SEC doing while these companies and others were offering lending products that looked an awful lot like securities?”

Toomey believes that more regulatory clarity and better communication from the SEC could’ve led to the collapse of Voyager and Celsius affecting investors differently had the agency said how it would apply existing securities laws to digital assets and services.

“It’s clear some Americans invested in unsustainable schemes, and even fraud,” Toomey said, rebuking what he called a “regulation-by-enforcement” approach from the SEC. He added, “It creates a legal gray area that allows entities with a higher tolerance for legal risk to offer products that might be bad for consumers.”