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SEC's Gensler Says "No Difference" Between Crypto and Securities Exchanges

Gary Gensler has once again called on U.S. crypto exchanges to register with the SEC as securities exchanges.

SEC's Gensler Says "No Difference" Between Crypto and Securities Exchanges
Photo: Evelyn Hockstein/Bloomberg

Key Takeaways

  • SEC Chair Gary Gensler believes that crypto exchanges should be registered and regulated like securities exchanges.
  • Gensler criticized crypto exchanges for providing custodial services and market making, stating the latter presented an “inherent conflict of interest.”
  • The SEC’s regulatory approach to cryptocurrencies has been widely criticized by the crypto industry and lawmakers alike.

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The U.S. Securities and Exchange Commission Chair Gary Gensler has reiterated his belief that crypto exchanges should be treated identically to securities exchanges, and therefore fall under his organization’s regulatory purview.

Gensler Calls for Crypto Exchange Regulation

Gary Gensler is turning up the heat on the crypto industry.

The SEC Chair Gary Gensler shared a video on Twitter today in which he argued cryptocurrency exchanges should be regulated like securities exchanges.

Gensler stated that there was “no reason to treat the crypto market differently [from the securities market] just because a different technology is used” and warned that regulating cryptocurrencies in another fashion would “risk undermining 90 years of securities law.”

He also criticized exchanges for providing custodial services without a proper regulatory framework to protect deposits. “Imagine handing over all of your stock to the New York Stock Exchange—that would never fly,” he said. Gensler further stated that by acting as market makers for various assets, crypto trading platforms were suffering from “inherent conflicts of interest.”

Today’s remarks are not the first time the SEC Chair has criticized crypto exchanges and asked them to register with his organization. In May, Gensler expressed his concern that crypto exchanges were trading against their clients in an interview with Bloomberg News. “Crypto’s got a lot of those challengesof platforms trading ahead of their customers. In fact, they’re trading against their customers often because they’re market-marking against their customers,” he said.

Gensler’s comments come two days after the SEC reportedly launched an investigation into leading crypto exchange Coinbase for allegedly trading unregistered securities. The regulatory agency named nine tokens listed on Coinbase as securities in a court filing the prior week. Gensler himself also made an appearance on CNBC to argue that crypto lending platforms should be regulated by the SEC as well.

Although the Gensler has repeatedly urged crypto exchanges to register with the SEC, many companies have criticized the agency for its lack of regulatory clarity. Coinbase itself petitioned the SEC to establish a “workable regulatory framework for digital asset securities guided by formal procedures and a public notice-and-comment process” instead of regulating through enforcement. Congressman Tom Emmer (R-MN) has also called the agency “power hungry” and accused it of trying to “jam” crypto companies into law violations.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.

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