SEC Chairman Emphasizes Non-Compliance by Crypto Firms in Recent Hearing

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has accused cryptocurrency companies of failing to comply with current securities rules.

Electronic money

in a hearing On April 18, during a meeting of the U.S. House of Representatives Financial Services Committee, the regulator stated that “there is nothing in the cryptocurrency market that is inconsistent with securities laws” because most cryptocurrencies are securities.

Gensler: The Crypto Market Is Full of Irregularities

According to Gensler, most cryptocurrency intermediaries combine many services that traditional financial institutions provide separately. This increases the risk for investors and explains why crypto companies must register with the SEC regardless of whether they are decentralized.

“Cryptocurrency intermediaries—whether they call themselves centralized or decentralized—often offer a mix of services that are fundamentally different from the rest of the stock market: trading functions, broker-dealer functions, custody functions, clearing and lending functions . Combining different functions in a cryptocurrency intermediary presents investors with inherent conflicts of interest and risks—risks and conflicts that the Commission has not mandated in any other market.”

Gensler further pointed out that non-compliance is widespread in the cryptocurrency space, which puts investors at risk and damages public confidence in capital markets.

“This is the law, not a choice. For example, calling yourself a DeFi platform is not an excuse for violating securities laws.”

Gensler highlights how SEC protects investors

Gensler highlighted a series of steps being taken by financial regulators to bring the crypto industry into a compliance framework. He pointed out:

“The Committee has spoken directly with cryptocurrency market participants regarding enforcement actions and multiple regulatory proposals.”

Gensler noted that the committee wants to update existing custody rules for investment advisors to “cover all cryptocurrencies and strengthen the protections offered by qualified custodians.”

Additionally, the SEC reopened for comment to revise the definition of an exchange. However, the proposed amendments have been criticized by many stakeholders.

SEC Commissioner Hester Pierce described the proposal as a way to “embrace stagnation, concentrate efforts, urge foreign experts to leave, and welcome the demise of new technologies.”

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According to Cryptoslate

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