US Securities and Exchange Commission (SEC) Chairman Gary Gensler has announced that the regulator will use all available tools to bring crypto platforms into compliance with its rules. Additionally, the SEC chief said, “Evidence of reserves is not a full accounting of a company’s assets and liabilities, nor does it satisfy segregation of client funds under securities laws.”
SEC Chairman Gensler on crypto regulation
SEC Chairman Gary Gensler stressed the importance of bringing crypto platforms into line after the securities regulator indicted former Alameda Research CEO Caroline Ellison and former FTX executive Gary Wang for their role in defrauding equity investors had raised. The SEC chief tweeted on Wednesday:
Until crypto platforms comply with tried and tested securities laws, risks for investors remain. It remains a priority for the SEC to use all of our available tools to bring the industry into compliance.
In an interview with Bloomberg on Thursday, Gensler pointed out that the SEC is only just beginning its crackdown on crypto firms that don’t comply with its rules.
“The runway is getting shorter” for crypto firms to come in and register with the SEC, Gensler explained, emphasizing, “The casinos in this Wild West are non-compliant intermediaries.”
The SEC chief also commented on Proof-of-Reserves (POR) reports used by a number of crypto exchanges, including Binance, to prove they have enough funds to make customer withdrawals. Noting that this practice falls short of the disclosures needed to protect investors, Gensler stated:
Evidence of reserves is not a complete accounting of a company’s assets and liabilities, nor does it satisfy segregation of customer funds under securities laws.
Gensler suggested that crypto companies should “give customers confidence that their crypto is really there” by “adhering to tried and tested custody, segregation and accounting rules.” The SEC focuses on maintaining financial records of crypto companies.
The securities regulator and its chairman have been heavily criticized by some for their enforcement-focused approach to regulating the crypto industry. They have also come under scrutiny over the collapse of crypto exchange FTX since Gensler and SEC officials met with former FTX CEO Sam Bankman-Fried (SBF) on multiple occasions.
Congressman Tom Emmer (R-MN) tweeted Thursday, “Gary Gensler and the SEC have had more meetings with SBF and FTX/IEX than anyone else in the crypto space, ostensibly to create a special regulatory framework to benefit FTX alone. The legislature went on to say:
Making backroom regulatory deals with bad actors is not a tool in the SEC’s toolbox.
Congressman Emmer said last month that the FTX fallout was not a crypto failure, it was the failure of the SEC and Chairman Gensler. Minnesota lawmakers have asked Gensler to testify before Congress about the cost of his regulatory failure.
Last week, the SEC chief emphasized the importance of regulating crypto issuers and intermediaries. He previously said that most crypto tokens are securities, but the crypto field is significantly non-compliant. The securities regulator recently released its strategic plan for the next four years, and crypto is among its top priorities. Gensler said in November that the SEC’s Enforcement Division remains focused on crypto.
What do you think of SEC Chairman Gary Gensler’s statements on crypto regulation? Let us know in the comment section below.
Kevin Helms
photo credit: Shutterstock, Pixabay, WikiCommons
Disclaimer: This article is for informational purposes only. It is not a direct offer, or a solicitation of an offer to buy or sell, or a recommendation or endorsement of any product, service, or company. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.