US Securities and Exchange Commission (SEC) Chairman Gary Gensler has accused crypto companies of failing to comply with existing securities rules.
In April 18 testimony before the House Financial Services Committee, the chief regulator said that “nothing about crypto markets is inconsistent with securities laws” because most cryptocurrencies are securities.
Gensler Says The Cryptocurrency Market Is Plagued With Defaults
Gensler said that most crypto intermediaries combine multiple services that traditional financial institutions provide separately. This increases the risk for investors and explains why crypto companies must register with the SEC, regardless of whether they are decentralized.
“Crypto brokers, whether they call themselves centralized or decentralized, often provide an amalgamation of services that are generally separate from each other in the rest of the exchanges: exchange functions, broker functions, functions custody and clearing and lending functions. The combination of the various functions within crypto intermediaries creates conflicts of interest and inherent risks for investors, risks and conflicts that the Commission does not allow in any other market.”
Gensler further noted that default was rife in the cryptocurrency sector, putting investors at risk and damaging public confidence in capital markets.
“It’s the law; it’s not a choice. Calling yourself a DeFi platform, for example, is not an excuse to defy securities laws,” he added.
Gensler highlights how the SEC protects investors
Gensler highlighted several steps the financial regulator has taken to make the crypto industry compliant. He noted that the “Commission has spoken directly with crypto market participants in enforcement actions and a number of proposed rules.”
Gensler noted that the Commission wants to update the current investment adviser custody rule to “cover all crypto assets and enhance the protections provided by qualified custodians.”
On top of that, the SEC has reopened the comment period to modify the definition of an exchange. However, the proposed amendments have drawn various criticisms from crypto stakeholders.
SEC Commissioner Hester Pierce described the proposal as a way to “embrace stagnation, force centralization, urge expatriation, and welcome the extinction of new technologies.”
SEC Chairman Gensler Highlights Crypto Firms’ Default in House Committee Testimony First Appearing on CryptoSlate.
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