Many cryptocurrency projects are flouting investor-protection rules and deserve more scrutiny, a group of investor advocates told Securities and Exchange Commission Chair Gary Gensler in a Monday letter.

The letter, signed by the Americans for Financial Reform Education Fund, the Consumer Federation of America and others, singled out stablecoins, crypto lending and exchanges as deserving of increased SEC attention.

“Without significant regulatory guidance, the digital asset marketplace has been born and grown into a Wild West,” said the letter, echoing a comparison often made by Gensler. “It is urgent for the Commission and other federal financial regulators to enforce the law to better protect investors and improve the integrity and stability of the digital asset markets.”

The letter comes as Gensler and other regulators amp up scrutiny of the crypto market, which in the past decade has grown from a little-known technology project to a multitrillion-dollar industry that proponents say could upend traditional finance.

The SEC has already brought or threatened lawsuits against some crypto products. On Friday, Coinbase quietly abandoned a plan to pay interest on crypto deposits after the SEC told the company it could be sued if it moved forward.

The U.S. Treasury Department has homed in on stablecoins and is conducting a review with other agencies that could lead to recommendations for new rules or oversight. Unlike Bitcoin whose price can rise or fall, stablecoins have a price pegged at $1. To achieve that backing, stablecoin providers hold reserves, which the firms have disclosed include cash, commercial paper and corporate bonds.

The advocacy groups’ letter said such reserves look similar to those held by money market funds and are vulnerable to market stress.

“Clearly, both products may create significant risks to investors and consumers,” said the letter of Tether and USD Coin, two of the largest stablecoins.

Although some lawmakers have said Congress and regulators need to better define securities rules in light of the new technology, the advocates said Gensler should “vigorously enforce” existing investor protections and not create a carve-out for the crypto market.

— By Joe Light (Bloomberg Mercury)