US SEC Next Chair: "Stricter Regulation Needed for Stock Trading Apps and Bitcoin"

US SEC Chairman Nominee Confirmation Hearing
Gensler Emphasizes "Principle of Protecting Individual Investors"

Gary Gensler, Nominee for Chairman of the U.S. Securities and Exchange Commission (SEC)
Photo by Reuters Yonhap News

[Asia Economy Reporter Kim Suhwan] Gary Gensler, the nominee for chairman of the U.S. Securities and Exchange Commission (SEC), emphasized the need to strengthen regulations on stock trading apps and Bitcoin, citing principles of protecting individual investors.

On the 2nd (local time), during his Senate confirmation hearing, Gensler stated, "We must enhance market transparency so that investors can be protected from financial fraud and manipulation," adding, "This will protect individual investors and ultimately contribute to the economic stability of middle-class households."

Regarding lawmakers' criticism that the stock trading app Robinhood has been negligent in protecting individual investors, Gensler responded, "It is true that technological advancements have increased market accessibility, but this has also created side effects," and said, "The SEC needs to look into this issue." During the GameStop incident, Robinhood, which was mainly used by individual investors in the U.S. for stock trading, had been criticized for causing the so-called 'Gamification' phenomenon, where novice retail investors traded stocks as if playing a game.

He also emphasized the need to regulate Payment For Order Flow (PFOF), where some securities trading apps, including Robinhood, transfer individual investors' stock orders to large securities firms such as Citadel Securities and earn profits in return. He criticized, "Individual investors are likely to trade stocks at undesirable prices due to PFOF," and "PFOF has increased the profits of securities firms rather than enhancing investor returns."

Gensler also hinted at the possibility of regulating Bitcoin. He stressed, "The SEC must take the lead in protecting cryptocurrency investors," and "We must actively intervene to prevent fraud and manipulation in the cryptocurrency market." According to Bloomberg News, Bitcoin prices dropped about 3% to $47,341 immediately after Gensler's remarks on Bitcoin regulation.

Additionally, Gensler was urged by Democratic senators to pursue progressive agendas such as addressing climate change. Sherrod Brown, chairman of the Senate Finance Committee and a Democrat, told Gensler, "I hope you require companies to analyze climate change risks and strongly punish illegal financial transactions."

Some Democratic lawmakers also called for measures to ensure diversity in corporate boards of Nasdaq-listed companies by implementing quotas for women, minorities, and LGBTQ directors.

In response, Gensler said, "I believe that diversity in board composition enhances the efficiency of decision-making processes," and added, "We will carefully examine what direction can protect investors' interests before implementing regulatory policies."

Meanwhile, Gensler has over 20 years of experience working at Goldman Sachs and served as chairman of the U.S. Commodity Futures Trading Commission (CFTC) during the Barack Obama administration, where he implemented strong financial regulatory drives. The Wall Street Journal (WSJ) reported, "The SEC is increasingly likely to transform into a more proactive financial market regulatory agency."