Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), thinks crypto lending platforms are not complying with the country’s financial regulations.
Gensler says in a new editorial in the Wall Street Journal that crypto shouldn’t be treated differently than the rest of the capital markets just because it uses a different technology.
“We can dispense with the idea that crypto lending isn’t subject to regulation. On the contrary, the rules have been around for decades. The platforms aren’t following them. Noncompliance isn’t the inevitable result of the crypto business model or underlying crypto technology.”
Gensler’s comments come after several high-profile crypto lending firms imploded over the past weeks. In July, embattled crypto brokerage Voyager Digital filed for Chapter 11 bankruptcy after a prominent borrower defaulted on a sizable loan.
And about a week later, crypto lender Celsius filed for Chapter 11 bankruptcy after it halted all withdrawals from its platform. In a New York-based bankruptcy court, the company revealed a $1.19 billion deficit on its balance sheet between assets and liabilities.
Last month, the SEC chair targeted crypto exchange platforms. Gensler said the stock market and crypto exchanges should offer similar consumer protections. He also raised the possibility of regulating the market-making aspect of crypto exchanges out of existence.
“Crypto trading platforms also may act as market makers. It means that when you sell your tokens, one of the platforms may actually be buying on the other side. Stock exchanges don’t do this. They don’t serve as their own market makers because that creates inherent conflicts of interest.
Thus again I’ve asked staff whether it would be appropriate to segregate out the market-making functions of these crypto platforms.”
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