Gary Gensler highlights issues like commingling of functions and lack of disclosures, urging compliance with existing securities laws.
In a recent Senate Appropriations Committee hearing, SEC Chairman Gary Gensler discussed the ongoing issues within the crypto industry, using the defunct crypto exchange FTX as a key example. He emphasized that the problems seen with FTX are not isolated incidents but are indicative of broader issues within the sector.
Gensler pointed out that many crypto exchanges are engaging in practices that would be prohibited for traditional stock exchanges. One major issue he highlighted is the commingling of functions. This means that crypto exchanges are often running multiple types of businesses under one roof, such as operating a hedge fund and trading against their own customers. This creates significant conflicts of interest and risks for investors.
Another critical point Gensler made is that most crypto tokens are subject to existing securities laws. He criticized crypto exchanges for not providing proper disclosures to their customers. According to Gensler, the argument that there is a lack of regulatory clarity is not a valid reason for non-compliance with U.S. laws. He stressed that the existing framework is sufficient and that crypto exchanges need to adhere to these regulations to protect investors.
For investors, the key takeaway is to be cautious when dealing with crypto exchanges. The commingling of functions and lack of proper disclosures can pose significant risks. It's essential to conduct thorough research and understand the regulatory environment before investing in crypto assets.
For crypto exchanges, the message is clear: compliance with existing securities laws is not optional. Providing proper disclosures and avoiding conflicts of interest are crucial steps in building trust and ensuring the long-term viability of the industry.
