The chairman of the US 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 on Crypto Exchanges Trading Against Customers
SEC Chairman Gary Gensler said in an interview with Bloomberg News Tuesday that some cryptocurrency exchange platforms may be betting against their own customers.
Gensler expressed concerns that crypto exchanges are not segregating different parts of their businesses, such as trading, custody, and market-making. He warned the “commingling” of services may hurt customers.
Noting that the problem of “trading platforms 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.
The SEC chief also raised issues with stablecoins, emphasizing that the three largest stablecoins are affiliated with crypto exchanges. Tether (USDT) is affiliated with Bitfinex, USD Coin (USDC) is to Circle, and Binance USD (BUSD) is connected to Binance.
Chair Gensler opened:
I don’t think that’s a coincidence. Each one of the three big ones were founded by the trading platforms to facilitate trading on those platforms and potentially avoid AML and KYC.
US lawmakers have called for the regulation of stablecoins, citing that they pose risks to the country’s financial stability. Both the Federal Reserve Board and the Financial Stability Oversight Council (FSOC) recently publish about stablecoin runs. Earlier this week, algorithmic stablecoin terrausd (UST) lost its peg to the US dollar, causing its price and the price of LUNA to plummet.
Gensler said that most digital assets fall under the purview of the SEC and crypto trading platforms should be registered with the agency. The agency recently said that it almost doubled the Enforcement Division’s crypto unit.
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