Gary Gensler, the chairman of the US Securities and Exchange Commission (SEC), recently published a video that highlights the plans of the agency for regulating crypto exchanges.
The SEC chief said that he had told the staff to directly work with crypto platforms in order to get them regulated and registered.
Crypto exchange regulation
The video from the SEC chairman was published on Thursday and it highlighted the plans of the securities regulator about regulating crypto exchanges for ensuring investor protection.
Gensler highlighted the similarities and differences that exist between traditional exchanges, such as the New York Stock Exchange (NYSE), and crypto trading platforms.
He said that there are certain protections in place when people are trading in the stock market and he elaborated that investors are protected from risks of running, manipulation, fraud and the like.
He said that crypto platforms are serving tens of millions of retail customers who do not go through a broker and directly purchase and sell crypto assets.
The SEC chief said that since there is such a huge number of retail customers trading on these crypto platforms, they should also offer protections that are similar to those offered by traditional security platforms.
He said that this was why he had asked the staff to directly work with the platforms for registration and regulation purposes and to ensure crypto tokens are also registered properly as securities.
The risk factor
Gensler also talked about the risk factor that already exists in crypto exchanges. He said that these crypto trading platforms also function as market makers, as opposed to traditional securities exchanges.
The SEC chairman said that when people sell their crypto tokens on a platform, the platform itself may be making the purchase.
He stated that this is not something that happens in the case of stock exchanges, as they do not serve as market makers because it would create a conflict of interest.
Hence, he said that he had also instructed the staff to look into whether segregating this market-making function of crypto platforms would be an appropriate move.
In conclusion, he said that the crypto market should not be treated differently just because it uses a different technology.
He said that it would be similar to claiming that electric car drivers do not need seat belts because they do not use gas.
The SEC boss also tweeted that rules in the capital markets are meant to protect investors from fraud and manipulation and safeguard market integrity.
If crypto markets do the same and offer protections, it would help people have more confidence in the crypto space.
The video from Gensler drew a lot of criticism from people. Some people accused the SEC chairman of wasting time and resources on his own promotion, instead of actually regulating cryptocurrencies.
Others criticized the regulatory authority for using an enforcement-centric approach for crypto asset regulation.
Bill Huizenga, a Republican Congressman, said that the SEC should provide some ‘clarity’ instead of using enforcement for regulation purposes.