Gary Gensler, the chairman of the US Securities and Exchange Commission (SEC) recently referred to cryptocurrency as a field that is highly speculative.
He added that it is also ‘rife with fraud’ because of its speculative nature. The chairman said that the industry has a lot of bad actors.
He also noted that the commingling of funds is common on a number of crypto platforms and they also execute trades against their clients.
The criticism
On Thursday, the SEC boss had an interview with Bloomberg in which he slammed the cryptocurrency field.
Gensler stated that investors need to be aware when investing in crypto that this asset class is highly speculative.
He also added that investors need to be aware that when investing in this field, they are not getting the protections associated with securities laws, even though they are applicable to a lot of tokens.
However, the agency’s chairman cautioned that despite this situation, the investors were not getting fair, full and truthful disclosure.
He said that the intermediaries and platforms were doing things that the Nasdaq or the New York Stock Exchange would never be permitted to do.
He stated that commingling of funds was common on these platforms and they also trade against their clients, as they have market makers on the other side of the trades.
Gensler stated that this is something they do not allow in the securities market in general.
The risks
Therefore, the chairman said that there were a lot of hucksters and fraud in the crypto field and while some good-faith actors do exist, there are not many of them.
A budget increase was also requested by the securities regulator for addressing the risks that are associated with the crypto market.
Back in March, Gensler had stated that the regulatory agency requires expertise, new tools as well as resources for regulating the crypto industry.
The SEC
It is not just the securities regulator criticizing the crypto industry, as the body itself has come under a lot of criticism.
The SEC as well as its chairman has come under a lot of fire for regulating the crypto industry via an enforcement approach.
As a matter of fact, Warren Davidson, a US Congressman, went as far as introducing legislation for removing Gensler as the chairman of the body for correcting a number of abuses.
According to the Republican lawmaker, they need to protect the capital markets in the United States from a tyrannical chairman, which includes Gensler.
The SEC has been going after the crypto industry for a while, but they picked up pace after the collapse of the FTX crypto exchange last year in November.
The exchange’s downfall revealed that it had been commingling customer funds and they were used for filling in the holes at Alameda Research, FTX’s sister trading firm.
This is likely what Gensler was referring to when he talked about commingling customer funds and trading against customers, as FTX did the former, while Alameda did the latter.