In a recent televised interview, Securities and Exchange Commission (SEC) Chair Gary Gensler expressed his reservations about the crypto marketplace, particularly regarding pending applications for spot bitcoin exchange-traded funds (ETFs). While Gensler refrained from making a definitive statement until the entire five-member commission could evaluate the recent surge of filings, his comments hinted at underlying concerns regarding fraud and manipulation within the crypto industry.
Gensler pointed out that the crypto trading platforms, where various crypto tokens are traded, lack compliance with the time-tested investor protection and fraud prevention measures commonly observed in traditional financial exchanges. He emphasized that these platforms engage in combinations of market functions that are prohibited in conventional exchanges due to conflicts of interest. This noncompliance raises red flags for investor protection, signaling potential regulatory hurdles for bitcoin ETFs, despite growing investor interest.
The skepticism surrounding ETF applications is not unfounded. The SEC recently filed a significant enforcement case against Coinbase, a major crypto exchange, over several aspects of its business practices. Furthermore, Binance, the world’s largest crypto trading platform, has faced allegations of secretly betting against its customers, further highlighting the need for scrutiny and regulation.
SEC calls for fair practices and market integrity in crypto trading
On the topic of digital asset-related legislation advancing in Congress, Gensler refrained from offering direct opinions but maintained that existing securities laws are clear for the industry, even though they appear to be frequently violated. Gensler has preferred to keep his conversations with elected officials private, despite calls from some congressional Republicans for more open engagement on legislative efforts related to digital assets.
Regarding the ongoing case against Ripple Labs over XRP, Gensler adhered to the SEC’s policy of not commenting on specific enforcement actions. However, SEC lawyers have already indicated their likely argument in the event of an appeal against the split decision in the Ripple case.
In the interview, Gensler underscored the importance of well-regulated capital markets and the necessity of having regulatory oversight to ensure fair practices and uphold the rules of the road.
