SEC Chair Warns Crypto Exchanges Working Against Users’ Interest

The Chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, reiterates his criticism of the blockchain industry, saying a few crypto exchanges may be working against the users’ interest as they bypass imposed rules to bet against customers. Furthermore, he notified that most of the circulating digital assets do not comply with the SEC’s requirements and need to register with the security watchdog.

As he urged multiple times before, Gensler points out to extend compliance rules for better transparency in this matter. Notably, he was intrigued by the industry last year and aimed to assure maximum protection for users purchasing Bitcoin or Altcoins.

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In a recent interview with Bloomberg, the Chairperson highlights that many cryptocurrency exchanges do not feature security measures required to protect users at full, mainly from the perspective of market-making and custody.

The Chair discussed that the “commingling” of services does not guarantee actions are performed in users’ interest.

Crypto’s got a lot of those challenges – of platforms trading ahead of their customers. In fact, they’re trading against their customers often because they’re market-making against their customers.

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He expressed that most of the cryptocurrencies are in the range of SEC. Given that, crypto companies offering investment opportunities of digital assets should register with the Commission as officials plan to regulate crypto with a comprehensive set of rules in the future.

While speaking about the misuse of Stablecoins, Gensler mainly pointed out the top-three stable currencies, including Tether, USD Coin, and Binance USD, neglecting the regulatory obligations of Know Your Customers and Anti-money Laundering.

He stated;

I don’t think that’s a coincidence. Each one of the three big ones was founded by the trading platforms to facilitate trading on those platforms and potentially avoid AML and KYC.

Tether (USDT) is one of the largest stablecoin with an $83 billion market value, introduced by the makers of the Bitifinex crypto exchange. Similarly, USDC was issued by a consortium of several companies, including the Coinbase exchange. And Binance USD has ties with the world’s largest crypto exchange by volume Binance, with more than a $17 billion market cap.

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In response to Gensler’s comments, Binance refers to a blog post it assured the exchange’s stablecoin complies with “strict guidelines and remaining transparent with the user community.” While Bitifinex didn’t respond immediately and Coinbase refused to say something.

Earlier in January, the Chairperson suggested that crypto companies should face broad scrutiny at the hands of financial watchdog. In addition, the regulators should directly handle such crypto exchanges to ensure investors’ protection. 

He said;

I’ve asked staff to look at every way to get these platforms inside the investor protection remit. If the trading platforms don’t come into the regulated space, it’d be another year of the public being vulnerable.

Featured image from Pixabay and chart from TradingView.com