With crypto concerns on the rise, SEC’s Gensler calls for help from Congress

Wall Street’s top regulator has faced a compressing budget for years, often resulting in fewer lawyers, examiners, and economists at the SEC who can monitor and regulate the expansive domain of securities markets that fall under the agency’s jurisdiction. But with the SEC now digging into a swath of new capital-markets issues like crypto, its top official is asking Congress for more resources.

“Funding-wise, we could use a lot more people,” Gensler said Tuesday at a Senate banking committee hearing. Within the crypto space, Gensler said that there are “6,000 projects, and while some of those are commodities, many of them are securities under the law.”

On Capitol Hill, the SEC’s waning resources are already well known. For years, officials have been asking lawmakers for more money to better fuel the SEC’s market-regulating abilities. Their successes have been few and far between. In 2010, then–SEC chair Mary Schapiro testified before the Financial Crisis Inquiry Commission that because the regulator is subject to congressional appropriations it “has been unable to maintain stable, sufficient, long-term funding necessary to conduct long-term planning and lacks the flexibility to apply resources rapidly to developing areas of concern.”

The SEC now has 4% fewer staffers than it did four years ago, Gensler told a subcommittee of the House Appropriations Committee in May. Its policing unit, the Division of Enforcement, was 6% smaller in fiscal year 2020 than it was five years earlier, and the Corporation Finance Division was 20% smaller, the SEC chair said.

In its latest budget request, the SEC has asked for a 5% bump in funding to about $2 billion, which it says will help it grow its staff back to 2016 levels. How lawmakers receive the SEC’s budget request remains to be seen. But for Gensler it comes at a critical juncture with the regulator facing a growing to-do list.

Currently, the SEC is juggling a new wave of issues like the growth of special purpose acquisition companies, private funds, and financial technology—all of which are already “stretching” its resources, the regulator said in May.

No issue may require more of a lift than crypto, though.

Under Gensler, the SEC has taken an active approach to examining digital assets. When the SEC chair was nominated, many in the crypto ecosystem expressed a cautiously optimistic outlook for the regulations to come. But Gensler, known to be a hard-charging regulator from his time at the Commodity Futures Trading Commission, has caught many by surprise with his active approach to examining the crypto market, a space he has equated to the “Wild West.”

The SEC is working with other financial regulators like the CFTC and the Federal Reserve to figure out how best to oversee the burgeoning digital assets ecosystem, Gensler said at the Senate hearing Tuesday, where he doubled down on calling for Congress to develop a clearer way for the agencies to work together with respect to crypto. In the meantime, the SEC chair is not showing any signs of easing his scrutiny of the industry. Gensler said at the hearing that stablecoins “may well be securities” and that much of the world of decentralized finance, or DeFi, is decentralized in name only—raising even more questions for the crypto industry as it looks to continue its rapid growth.