SEC chief issues dire warning for crypto exchanges
Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), continues to crack down on the crypto industry. In an investor advisory committee, the SEC chairman declared that lending platforms and crypto exchanges operate “investment advisers cannot rely on them as qualified custodians.” Gensler added:
Just because a crypto trading platform claims to be a qualified custodian doesn’t mean it is. When these platforms fail – which we’ve seen time and time again – the investors’ assets have often become the property of the failed company, and the investors line up at bankruptcy court.
For Gensler, advisers should comply with the current custody rule, which requires investors’ funds and securities to be held with “qualified custodians”. These qualified custodians, as Gensler identifies, are money managers on behalf of their clients regulated by the SEC under the US Investment Advisers Act of 1940.
This follows the SEC’s new proposed federal regulations that would expand custody rules to include cryptocurrencies and require exchanges to register to hold client funds. SEC filing requirements:
(…) we redesign the custody rule as new rule 223-1 under the Advisers Act (the “security rule” or “the proposed rule”) and propose a number of changes to strengthen protection.30 The proposal is designed to recognize developments in products and services that investment advisers offer to their clients and to strengthen and clarify existing custody protection.
Gensler also mentioned to the advisory committee that predictive computing technology can create “inherent conflicts of interest” related to advisers’ demands on their clients. Gensler said he had asked agency staff to recommend addressing those issues.
The SEC continues its regulatory enforcement against the crypto industry
The recent statements by the chairman of the Securities and Exchange Commission are deeply related to the recent actions taken by the regulatory agency.
Recently, the SEC has loaded Singapore-based Terraform Kabs and Do Hyeong Kwon of “orchestrating a multi-billion dollar” crypto-asset “securities scam”, claiming they were involved in an algorithmic stablecoin and other crypto-asset securities. Gensler said:
We allege that Terraform and Do Kwon failed to provide the public with the full, fair and truthful disclosure required for a number of crypto-asset securities, particularly for LUNA and Terra USD.
The SEC recently cracked down on crypto companies that offer “securities without registration.” The regulatory crackdown has left investors with many questions and unclear rules.
To this end, Coinbase has too launched a campaign called “Crypto435” to listen to the concerns and requests of US-based customers affected by the SEC’s action. The campaign will be carried out in all 435 congressional districts in the United States.
The crypto market cap is at $1.022 trillion as of press time, down -1.79% in the last 24 hours and down -45% in the last year. Bitcoin’s market cap has remained at $450 billion, representing a 40.45% dominance.
On the other hand, stablecoins have a market cap of $136 billion, representing a 12% share of the crypto ecosystem’s total market cap.
Featured image from Unsplash, chart from TradingView.com
