The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, says cryptocurrency exchanges are “trading against their customers often because they’re market-marking against their customers.” He has raised concerns over crypto trading platforms “commingling” services.
SEC Chair Gensler: Crypto Exchanges Trading Against Customers
In an interview Tuesday with Bloomberg News, Gary Gensler, Chairman of the SEC stated that certain cryptocurrency exchange platforms could be placing bets against their customers.
Gensler was concerned that cryptocurrency exchanges do not separate different aspects of their business, including trading, custody and market-making. He warned that the “commingling” of services may hurt customers.
Noting that the problem of “platforms trading ahead of their customers” is widespread in the crypto space, the SEC chair asserted:
In fact, they’re trading against their customers often because they’re market-marking against their customers.
SEC Chief also addressed issues regarding stablecoins. He pointed out that three of the largest stablecoins were associated with cryptocurrency exchanges. Bitfinex is associated with Tether (USDT), Circle is linked to USD Coin (USDC), and Binance USD is tied to Binance.
Chair Gensler stated:
I don’t think that’s a coincidence. The trading platforms that created each of these three major ones had the goal to make it easier for traders on their platforms, and possibly avoid AML or KYC.
U.S. lawmakers have called for the regulation of stablecoins, citing that they pose risks to the country’s financial stability. Stablecoin panics have been declared by the Federal Reserve Board as well as the Financial Stability Oversight Council. The price of LUNA and algorithmic stablecoin terrausd fell this week after UST lost its U.S. dollars peg.
Gensler stated that the majority of digital assets are under the SEC’s purview and all crypto trading platforms must be registered with them. The agency recently said that it almost doubled the Enforcement Division’s crypto unit.
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