US Securities and Exchange Commission (SEC) Chair Gary Gensler has severally pointed out that cryptocurrency exchanges and trading platforms cannot be treated differently from traditional stock exchanges.
And amid the increased regulatory spotlight on crypto, helped by recent events, the SEC boss has renewed that call.
In a video he shared on Twitter, Gensler says crypto platforms will better protect customers – and see further growth as a result – if they embrace regulatory compliance.
According to Gensler, digital asset platforms (like regulated stock markets) can help protect millions of users against aspects such as “manipulation, fraud and front running,” if they are registered and properly regulated.
“With so many retail customers trading on crypto platforms, we should make sure that those platforms offer similar protections,” he noted, adding that SEC staff have been mandated to pursue registration of these crypto platforms. The key, he explained, is to ensure the exchanges are regulated as securities platforms where appropriate.
We have rules in our capital markets to safeguard market integrity & protect against fraud & manipulation. If a company builds a crypto market that protects investors & meets the standard of our market regulations, people will more likely have greater confidence in that market. pic.twitter.com/ZxdBfvmqXP
— Gary Gensler (@GaryGensler) July 28, 2022
Conflict of interest?
Gensler also pointed out that with crypto exchanges also acting as market makers, potential conflict of interest could harm investors. As such, he has asked staff at the securities watchdog to find what’s possible with regard to “segregating out” the market making functionality from the digital asset platforms.
If the traditional exchanges don’t do this – market making – why should crypto platforms be any different?
“Look, there’s no reason to treat the crypto market differently, just because a different technology is used,” he pointed out.
Gensler’s comments come days after he reiterated the need to have crypto exchanges and lending platforms offer more disclosures as part of basic consumer protection. They also come amid reports the SEC is investigating crypto exchange Coinbase over the listing of securities tokens.
Coinbase refutes these claims and alongside several industry players, say the agency is engaging in “regulation by enforcement.”