Gary Gensler is the chairman of the U.S. Securities and Exchange Commission. He has described two ways the agency intends to regulate the cryptocurrency industry. A U.S. congressman is now investigating whether Gensler assisted FTX CEO Sam Bankman Fried and his bankrupt crypto exchange to gain a regulatory monopoly.
SEC Chair Gensler on FTX’s Undoing
Gary Gensler, chairman of the U.S Securities and Exchange Commission (SEC), spoke to CNBC Thursday about crypto regulation and the undoing FTX cryptocurrency exchange FTX.
Without confirming whether the SEC is investigating FTX, the chairman explained that when crypto exchanges “mix together a bunch of customer money” without disclosure and “leverage borrowing against it,” investors get hurt.
Gensler was also asked about Kim Kardashian’s case against the watchdog, which is, relative to FTX, a smaller one. Gensler replied:
I believe that investors require better protection in this sector. But I would say this, this is a field that’s significantly non-compliant, but it’s got regulation and those regulations are often very clear, and we have multiple paths.
“One path is working with those crypto exchanges, crypto lending platforms, and to get them properly registered and why that matters is that so the public is protected,” he explained.
Gensler stressed that enforcement is another option. “We’ve brought, between my predecessor and the teams now at the SEC, at least 100 actions … and we’ve been very clear in these various enforcement actions.” He also referenced the regulator’s recent win against LBRY.
‘Come in, Talk to Us’
Gensler often said that crypto trading and lending platforms should “come in, talk to us, and get registered.”
According to his calendar, Sam Bankman-Fried, CEO of FTX, did visit him and have a conversation on March 29. “Do you feel like you were hoodwinked?” he was asked.
The chairman of SEC responded:
I think we’ve been clear in these meetings … non-compliance is not going to work, the public is going to be hurt, but also we’re going to continue on these dual paths.
He added that if necessary, the SEC will be “the cop on the beat, going into court, putting the facts and the law in front of judges.”
“It’s about the platforms or the intermediaries. This is not like the New York Stock Exchange or Nasdaq,” Gensler stressed, adding that a handful of crypto lending and trading platforms “comingle” assets. He stated:
It’s another toxic combination where they take people’s money, they borrow against it, it’s not much disclosure, and then they trade against their customers.
The chairman added that the SEC is focusing on these platforms but “Building the evidence, building the facts often takes time.”
Congressman investigates whether Gensler helped FTX by using legal loopholes
Following Gensler’s interview, Congressman Tom Emmer tweeted that his office has received reports alleging that the SEC chairman helped Bankman-Fried and FTX work on legal loopholes to obtain a regulatory monopoly. “We’re looking into this,” the lawmaker wrote.
Last week, four congressmen accused Gensler of “hypocritical mismanagement of the SEC,” emphasizing 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 was also criticised for adopting an enforcement-centric approach when regulating the crypto sector.
What do YOU think about the comments of Gary Gensler, SEC Chairman and Congressman Tom Emmer. Please leave your comments below.
Kevin is a student in Austrian Economics. He discovered Bitcoin in 2011 and has been an evangelist for it ever since. His interests lie in Bitcoin security and open-source systems. He is also interested in network effects and the intersection of economics and cryptography.
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