U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler outlined two paths the agency is taking to regulate the crypto industry. Meanwhile, a US congressman is investigating whether Gensler helped FTX CEO Sam Bankman-Fried and his bankrupt crypto exchange over legal loopholes to gain a regulatory monopoly.
SEC Chairman Gensler on the loss of FTX
U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler spoke about crypto regulation and the cancellation of cryptocurrency exchange FTX in an interview with CNBC on Thursday.
Without confirming whether the SEC was investigating FTX, the chairman explained that when crypto exchanges “mix a bunch of client money” without disclosure and “borrow against it,” investors are hurt.
He was also asked about the watchdog going after Kim Kardashian who, on a relative basis, is a much smaller case than FTX. Gensler replied
Look, I think investors need better protection in this space. But I would say this, this is an area that is significantly out of compliance, but there are regulations and those regulations are often very clear, and we have multiple routes.
“One way is to work with these crypto exchanges, these crypto lending platforms, and get them properly registered and the reason that matters is that the public is protected,” he explained.
Another route is through enforcement, Gensler pointed out. “We have filed, between my predecessor and the teams now at the SEC, at least 100 actions…and we have been very clear in those various enforcement actions.” He also referenced the regulator’s recent win over LBRY.
“Come in, talk to us”
Gensler has often said that crypto trading and lending platforms should “come in, talk to us, and sign up.”
According to his schedule, FTX CEO Sam Bankman-Fried came to talk to him on March 29. “Do you feel like you’ve been cheated on?” he was asked.
The SEC Chairman responded:
I think we’ve been clear in those meetings… non-compliance won’t work, the public will be hurt, but we’re also going to continue on both of these paths.
He added that if necessary, the SEC will be “the cop on the spot, going to court, putting the facts and the law before the judges.”
“It’s about platforms or intermediaries. It’s not like the New York Stock Exchange or the Nasdaq,” Gensler pointed out, adding that a handful of crypto-asset lending and trading platforms “mix together.” He issued the following opinion:
It’s another toxic combination where they take people’s money, they borrow against it, it’s not a lot of disclosure, and then they trade against their customers.
The chairman added that the SEC is focused on these platforms, but “Building the evidence, building the facts often takes time.”
Congressman investigates whether Gensler helped FTX over legal loopholes
Following Gensler’s interview, Congressman Tom Emmer tweeted that his office had received reports alleging the SEC Chairman helped Bankman-Fried and FTX work out legal loopholes to gain a regulatory monopoly. “We are reviewing this,” the lawmaker wrote.
Last week, four members of Congress accused Gensler of “hypocritical mismanagement of the SEC,” pointing out that he refuses to practice what he preaches. This week, two lawmakers said they were “deeply concerned” that the SEC is enacting rules too quickly, without sufficient feedback. Gensler has also been criticized for taking a law enforcement-centric approach to regulating the crypto industry.
What do you think of the comments from SEC Chairman Gary Gensler and Congressman Tom Emmer? Let us know in the comments section below.
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