U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has told Washington lawmakers that he is working to create a set of regulations to oversee cryptocurrency markets.
Gensler told the U.S. Senate Banking Committee that he and his team are trying to protect investors through better regulation of the thousands of new digital assets and coins, as well as oversight of the more-familiar Bitcoin and Ethereum markets.
The SEC chief noted the enormity of the task, saying that the Wall Street regulator could use “a lot more people” to evaluate the 6,000 novel digital coins and determine whether they all qualify as securities under U.S. law.
Lawmakers also asked Gensler about the SEC’s ongoing analysis of payment for order flow, a controversial practice that online brokerages such as Robinhood Markets (NASDAQ:HOOD) use to make money.
Firms such as Robinhood sell their customers’ trades to market makers such as Citadel Securities that execute the buy and sell orders. Market makers generate profits by pocketing the difference between the price at which they buy shares on the open market and the price they receive from selling them to Robinhood clients.
That means there is an incentive for market makers to inflate the price they quote to Robinhood’s customers. And given Citadel’s commanding market share, some regulators are concerned that investors may not be getting the best deal, since online brokerages themselves have an incentive to keep rosy relations with the companies that buy their trading volume.
“The United Kingdom, Canada and Australia have bans,” Gensler told reporters following the hearing. “We’re taking a look at the whole market structure.”
