SEC Chair Warned of Crypto Exchanges Working Against Their Clients’ Best Interests

Gary Gensler – Chairman of the US Securities and Exchange Commission – argued there are cryptocurrency exchanges that bypass rules and bet against their own clients. He reminded that most digital assets fall under the SEC’s scope, and exchanges operating with them should register with the watchdog.

SEC to Double Down on its Enforcement Efforts

The Chairman of America’s top financial watchdog – Gary Gensler – has urged for applying comprehensive rules to the digital asset industry multiple times. Last year, he revealed he is “intrigued” by the sector but wants investors to have maximum protection when dealing with bitcoin or altcoins.

In a recent interview for Bloomberg News, Gensler expressed concerns that some crypto exchanges fail to protect their customers with the necessary security mechanisms. Some of these areas that people should be aware of include custody and market-making. The American opined that this “commingling” of services might not be in customers’ best interests.

“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.”

Gensler reiterated that most digital assets fall under the Commission’s range. As such, exchanges providing crypto opportunities should register with the SEC, assuring that the regulator will bolster its enforcement efforts in the field in the future.

Speaking about stablecoins, Gensler asserted that three of the leading ones – Tether, USD Coin, and Binance USD – facilitate trading on major exchanges by “potentially” avoiding anti-money laundering and know-your-customer rules:

“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.”

Responding to his comments, Binance assured its stablecoin follows “strict guidelines” and remains “transparent with the user community.”

SEC’s Focus in 2022 is on Crypto Exchanges

In January, Gensler opined that digital asset platforms should face enhanced scrutiny from the financial watchdog, as it should directly regulate such companies to grant investors more protection:

“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.”

At the end of 2021, the SEC appointed Corey Grayer as a Senior Advisor, whose primary duty is to counsel Gensler on crypto regulations. The former has previously solved “issues ranging from consumer and investor protection.”