Decentralized finance (DeFi) could pose fresh challenges for U.S. investors, Securities and Exchange Commission (SEC) Chair Gary Gensler said Wednesday.

The cryptocurrency sector poses various risks to investors in the markets and challenges to the securities regulator, Gensler said in prepared testimony before the House Appropriations Committee. He pointed to volatility in the market and novel products as some examples of these issues.

"Crypto lending platforms and so-called decentralized finance ('DeFi') platforms raise a number of challenges for investors and the SEC staff trying to protect them," Gensler said.

The crypto market had an overall market capitalization of $1.6 trillion on Monday after losing over one-third of its value in under two weeks, he said. While bitcoin grabs most headlines, he noted that more than 80 tokens have a $1 billion market cap, while more than 1,500 had a market cap of over $1 million.

Gensler previously told the House Financial Services Committee that stronger regulation around crypto exchanges could help protect investors. In particular, he suggested a dedicated market regulator for the crypto markets would provide some protection around fraud and manipulation, two concerns the SEC has often cited in rejecting bitcoin exchange-traded fund (ETF) applications.

The regulator repeated the concern on Wednesday.

"Tokens currently on the market that are securities may be offered, sold, and traded in non-compliance with the federal securities laws. Furthermore, none of the exchanges trading crypto tokens has registered yet as an exchange with the SEC. Altogether, this has led to substantially less investor protection than in our traditional securities markets, and to correspondingly greater opportunities for fraud and manipulation," he said.

Even the crypto market's current volatility is suspect, Gensler seemed to say.

"In recent weeks, the reported trading volume has ranged from $130 billion to $330 billion per day. These figures, however, are not audited or reported to regulatory authorities, as the tokens are traded on unregistered crypto exchanges. That is just one of many regulatory gaps in these crypto asset markets," Gensler said.

He also indicated that the SEC would be willing to bring enforcement actions against parties that don't comply with federal securities laws.

The regulatory agency has already brought 75 such actions, and "has been consistent" in how it describes its approach, he said. He said the SEC "should be ready" to bring further actions in a speech to the Financial Industry Regulatory Authority last week.