SEC Chairman Criticizes Crypto Platforms for Non-Compliance and Customer Funds Handling

Gary Gensler, the Chairman of the Securities and Exchange Commission (SEC), has expressed concerns about the “unregulated” and “skewed” nature of the cryptocurrency market. During a Q&A session at the annual Financial Markets Conference organized by the Federal Reserve Bank of Atlanta on May 15th, Gensler was asked about the SEC’s stance on Coinbase and the broader cryptocurrency market. He offered a negative assessment of the crypto market.

“Their business models are built on ‘non-compliance.’ Their platforms are built on customer’s money,” stated the SEC Chairman.

Gary Gensler

Gensler also highlighted that “3 out of the 4 largest bankruptcies in the United States are related to crypto.” This underscores his viewpoint that the convergence of traditional finance and digital currencies poses increased risks.

As AZCoin News reported, First Republic Bank, Silicon Valley Bank, and Signature Bank are among the top four largest bankruptcies in U.S. history. Notably, Silicon Valley Bank, Signature Bank, and Silvergate Bank have provided services related to cryptocurrencies.

Tom Barkin, the CEO of the Federal Reserve Bank of Richmond, questioned Gensler about the SEC’s reluctance to introduce regulations for the crypto market.

“The laws have been put in place, but this is largely an area that operates outside of regulations. Our agency has established regulations for exchanges, brokers, custodial asset managers, and securities transactions. The new technology does not make them incompatible with the policies set forth by Congress,” said Gary Gensler.

Furthermore, Gensler stated that decentralized platforms, in reality, revolve around just a few developers.

“The crypto market is built on the concept of decentralization, but historically, there has been a tendency towards centralization. It claims to be decentralized, without a central bank or government authority. However, it still relies on the legal framework when it comes to bankruptcy,” added Gary.

The SEC has faced criticism for repeatedly delaying the introduction of regulatory oversight for the cryptocurrency market. Some members of the U.S. House of Representatives have denounced the SEC’s stringent approach to cryptocurrency regulations, arguing that under Gensler’s leadership, the agency demands technical asset companies to register with the authority but fails to provide specific guidance.

On May 16th, Republican lawmakers and traditional financial institutions expressed discontentment with the SEC’s proposed new regulations pertaining to the crypto market. In February, the SEC proposed amendments to its custody rule, which, if approved by the commission, would designate federal financial organizations as custodians of users’ crypto assets instead of crypto platforms assuming that responsibility as before.

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