During his recent Office Hours video, SEC Chair Gary Gensler discussed cryptocurrency lending and exchange platforms. In a similar way to stock markets, he suggested examining whether exchanges should be able to the custody of private keys and separate market making and exchange activities.
The SEC and the CFTC fight over who will oversee cryptocurrency markets between U.S. regulators, namely the SEC. The SEC asserted that the cryptocurrencies involved in the insider trading case are all securities in the recent lawsuit against an ex-Coinbase executive for insider trading.
It was later reported by Bloomberg that Coinbase was being investigated for allowing Americans to trade digital assets that ought to have been registered as securities.
The SEC’s Gensler confirmed that SEC staff are registering and regulating platforms directly during Office Hours. Additionally, crypto tokens should be reported as securities ‘where appropriate.
Cryptocurrency platforms should offer consumers the same protection as the stock market, said the SEC Chair. In recent weeks, several recent crypto bankruptcies have drawn attention to this issue. One such example is the bankruptcy of lending platform Celsius.
Private keys and market making
In the context of the custody of private keys, Gensler said, “Can you imagine giving the New York Stock Exchange all your stock?” There is no way that would fly. He wants the assets to be protected at all costs. Are third-party custodians required for exchanges to hold digital assets? Some people assumed that crypto exchanges would ring-fence their assets, and it’s certainly true that some did.
A stock exchange acting as its own market maker would also result in a conflict of interest, according to Gensler. Therefore, he wants to separate these activities from crypto exchanges.
