Is the cryptocurrency industry a wild west? For Gary Gensler, Chairman of the Securities and Exchange Commission (SEC), there is no doubt. Moreover, he equates companies in the sector to “casinos”. But for what reasons? We will explain everything to you.
Exchanges in the sights of the SEC
During a recent intervention, the chairman of the Securities and Exchange Commission (SEC), Gary Gensler, revealed his annoyance against cryptocurrency exchanges evading the regulations in force. The leader of the American institution notably compared the cryptocurrency sector to a “Wild West” without legal framework :
“The casinos of this Wild West are the intermediaries [exchange de cryptomonnaies] non-compliant. »
Between the lack of transparency, the tokens issued without a legal framework and the criminal activities linked to FTX, the SEC gets annoyed and demands more regulation. The American institution is not the only one to want new rules: for States around the world, the bankruptcy of the FTX group was the trigger pushing them to question their legal frameworks.
Moreover, remember that the SEC accuses Sam Bankman-Fried, founder and former CEO of FTX, as well as his two associates Caroline Ellison and Gary Wang, to have precisely lacked transparency by embezzling their clients’ funds while concealing their financial statements from their partners.
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Exchanges with dubious transparency?
After the debacle caused by FTX, many investors doubted the liquidity available on cryptocurrency exchanges. In response, the platforms issued proof of reserve, a system to prove the presence of a user’s assets on a given platform.
Only, for Gary Gensler, this method is far from sufficient to grant his confidence to these companies. In particular, he points to the lack of transparency of the platforms with regard to their financial situation, as well as the total absence of separation of funds between the different clients of the same firm.
“Proof of reserve is not a complete accounting of a company’s assets and liabilities, and does not allow the segregation of funds between different clients under securities laws. »
Moreover, since the tokens created by the platforms are partially integrated into their treasuries, a legal framework must be created to adapt to their different uses. Nevertheless, for the President of the SEC, the majority of these tokens are similar to financial securities, and must therefore follow the resulting legislation.
This intervention by Gary Gensler seems quite strange when we know Sam Bankman-Fried’s troubled relationship with the SEC: the regulator’s teams met with FTX last March to discuss the custody of cryptocurrencies.
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