Crypto trading and lending platforms should offer similar customer protections that exchanges provide, warned Gary Gensler, chairman of the US Securities and Exchange Commission.
Gensler made the comments after several major crypto companies collapsed as prices of digital assets crashed. Earlier this month, digital asset broker Voyager Digital and lender Celsius filed for ongoing bankruptcy protection in the US, leaving millions of users unable to access their funds on the platforms.
“I have asked our employees to work directly with [crypto] platforms to get them registered and regulated much like stock exchanges, and to make sure that these crypto tokens also come in and get registered where appropriate, as securities,” Gensler said in a video on the “Office Hour” series Thursday.
Which cryptocurrencies qualify as securities has long been discussed as a central topic around the regulation of digital assets. Most recently, Coinbase Global COIN,
is reportedly facing an investigation into whether it allowed investors to trade digital assets that should have been registered as securities, according to a Bloomberg article.
On July 21, the SEC announced insider trading charges against a former Coinbase product manager, for allegedly tipping off his brother and a friend to planned asset listings on the exchange before they went public. While the agency did not accuse Coinbase of any wrongdoing, it said nine of the 25 crypto assets involved in the case were securities, while seven of the nine tokens were listed on Coinbase.
Read: Coinbase, Flexa dispute SEC claims that these 9 cryptocurrencies are securities
By investing with crypto platforms, investors are also “literally giving away the keys to your crypto,” Gensler said. “Just imagine this, imagine handing over all your stocks to the New York Stock Exchange. It would never fly.”
In some cases, crypto trading platforms can also act as market makers, unlike traditional stock exchanges, Gensler said. “Exchanges don’t do this, they don’t act as their own market makers because that creates inherent conflicts of interest. Therefore, I have again asked staff to consider whether it would be appropriate to separate market-making functions on these crypto platforms,” according to Gensler.
Hear from Mike Novogratz at the Best New Ideas in Money festival on September 21st and 22nd in New York. The Galaxy Digital boss has ideas for navigating the crypto winter.
