US Senator Warren Presses SEC to Address Crypto Exchange Outages, High Transaction Fees, Financial Inclusion

At the U.S. Senate Banking Committee hearing Tuesday, Senator Elizabeth Warren called on the chairman of the Securities and Exchange Commission (SEC), Gary Gensler, to increase oversight of cryptocurrency. She brought up several problems she associates with cryptocurrency that could hurt small investors.

Senator Elizabeth Warren Says ‘There’s a Whole List of Problems With Crypto’

U.S. Senator Elizabeth Warren questioned U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler about several issues regarding cryptocurrency at the Senate Banking Committee hearing Tuesday.

The senator from Massachusetts began by noting that last Tuesday, “In a matter of hours, $400 billion in market value disappeared.” She then pointed out that as the prices of cryptocurrencies tumbled, “several of the biggest crypto exchanges had outages, which kept customers from making withdrawals or trades.”

Questioning how this affects small retail investors, “who don’t have a lot of money to lose,” Warren described a hypothetical situation. “Let’s say that last Monday I took out the last sliver of my savings. I went on the crypto exchange Coinbase. I bought $100 worth of ether. Then I woke up early on Tuesday morning, I saw that the market looked like it was beginning to tank, and I thought I better sell right now,” she said, adding:

But when I tried to sell, Coinbase, the exchange, was down. So, Chair Gensler, was there anything I could do to get my money out?

Gensler replied: “Not at a federal agency because they [Coinbase] haven’t yet registered with us, even though they have dozens of tokens that may be securities.”

Senator Warren then described another hypothetical situation. “Instead of buying ether on Coinbase last Monday, I decided instead to put that $100 towards buying a new, cool token — let’s call it ‘new coin’ — that was being hyped on Twitter,” she detailed. “New coin is available only on a ‘decentralized’ crypto exchange, so to buy it I had to pay a fee, about $20, to the crypto miners who processed the transactions … Then of course I woke up on Tuesday morning and the market was tanking.”

She asked Gensler how much she would have to pay the exchange to sell her coins and get back into dollars fast, stating:

How much would I have to pay to get out of defi on Tuesday to sell my coins. Would I have had to pay a second $20 fee or might I have had to pay even more?

The SEC chairman promptly replied, “I don’t know because it will be all in the user agreement.” He added that many platforms “are only decentralized in name only,” citing that “There is a user agreement. There’s something you are doing with this platform. There’s a governance token. There’s usually some fees.”

While the SEC chairman stated that he does not know what fee a particular exchange charges, Senator Warren brought up network fees.

“We do know some of the fees from last Tuesday. The fee to swap between two crypto tokens on the Ethereum network was more than $500, obviously way more than the $100 I was trying to trade in the first place,” she exclaimed, noting:

The question I have is, in the face of these high, predictable fees, small investors could easily get jammed and wiped out entirely.

Senator Warren then asserted that cryptocurrency is not a path to financial inclusion. “Chair Gensler, advocates say crypto markets are all about financial inclusion. But the people who are most economically vulnerable are the ones who are most likely to have to withdraw their money the fastest when the market drops. Does this sound like a path to financial inclusion to you?”

Gensler replied: “It’s a highly speculative asset class. It doesn’t sound like the path that you mentioned.”

Warren continued:

There’s a whole list of problems with crypto: unreliable tech, scams, devastating climate impact. But high, unpredictable fees can make crypto trading really dangerous for people who aren’t rich.

She concluded, “Regulators need to step up to address crypto regulatory gaps,” emphasizing, “Chair Gensler, I expect you and the SEC to take a leading role in getting this done.”