SEC Chairman Gensler Highlights Crypto Firms’ Failure to Comply with House Committee Testimony
US Securities and Exchange Commission (SEC) Chairman Gary Gensler accused crypto firms of failing to comply with existing securities regulations.
In testimony on April 18 before the House Financial Services Committee, the regulatory chief said, “nothing about the crypto markets is inconsistent with the securities laws” because most cryptocurrencies are securities.
Gensler says the crypto market is full of non-compliance
Gensler said most crypto intermediaries combine several services that traditional financial institutions offer separately. This increases the risk for investors and explains why crypto firms must register with the SEC regardless of whether they are decentralized.
“Crypto intermediaries – whether they call themselves centralized or decentralized – often offer a mix of services that are typically separated from each other in the rest of the securities markets: exchange functions, broker-dealer functions, custody and clearing functions, and lending functions. The intermingling of the various functions within crypto-intermediaries creates inherent conflicts of interest and risks for investors – risks and conflicts that the Commission does not allow in any other marketplace.”
Gensler further noted that non-compliance was widespread in the crypto sector, putting investors at risk and damaging public confidence in the capital markets.
“It is the law; it is 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 measures the financial watchdog has taken to bring the crypto industry into compliance. He noted that “The Commission has spoken directly with crypto market participants in enforcement actions and a number of proposed rules.”
Gensler pointed out that the commission wants to update the current depository rule for investment advisers to “cover all crypto assets and improve the protections that qualified custodians provide.”
In addition, the SEC has reopened the comment period to amend the definition of an exchange. However, the proposed changes have received several criticisms from crypto stakeholders.
SEC Commissioner Hester Pierce described the proposal as a way to “embrace stagnation, force centralization, encourage deportation and welcome extinction of new technology.”
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