SEC Chair Gensler Warns Crypto Exchanges About Enforcement

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has cautioned cryptocurrency exchanges that providing investor disclosures does not shield them from regulatory scrutiny.

In a recent interview with CNBC, Gensler emphasized that disclosures are insufficient if crypto exchanges engage in market manipulation or disseminate misleading information affecting investment decisions.

Gensler pointed out that many crypto companies fail to provide any disclosures and operate in ways that would be unacceptable in traditional financial markets.

Following the collapse of cryptocurrency exchange FTX in late 2022, the SEC has ramped up enforcement in the digital asset sector. The agency is currently involved in litigation against major U.S. crypto market players, including a high-profile case against Coinbase, the largest U.S. exchange by daily trading volume.

However, Gensler adopted a more flexible stance when discussing the potential for crypto ETFs, such as those involving the Solana memecoin BONK. This softer approach aligns with the SEC’s recent approval of spot Ethereum ETFs, a surprising move given previous views of Ethereum as an unregistered security.

The approval of Ethereum ETFs has sparked discussions about the regulator’s openness to other altcoin spot ETFs. Political factors, including the influence of the crypto lobby and the upcoming 2024 election, are believed to have influenced the SEC’s evolving position.

Meanwhile, Gensler has criticized the Financial Innovation and Technology for the 21st Century Act (FIT21 Act), a new pro-crypto bill recently approved by the House of Representatives. He expressed significant concerns over its potential impact on investor protection and market stability.

In a statement on May 22, 2024, Gensler argued that the FIT21 Act would create substantial regulatory gaps, undermining decades of established oversight. He warned that the act could jeopardize investor safety and destabilize capital markets by shifting regulatory responsibilities away from the SEC.

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