Chairman of SEC, Gary Gensler, has raised his criticism of exchanges dealing with digital assets, arguing that some platforms are violating rules and maybe betting against their clients.
What is this regarding?
As per Bloomberg News, the Securities and Exchange Commission U.S. chairman reiterated on Tuesday that most digital assets come under the SEC purview. The venue platforms need to register themselves with the regulator. He said that the SEC is strengthening its compliance efforts.
In an interview with Bloomberg News, Gensler said he was concerned with crypto exchanges not demarcating between different parts of the business, such as trading venue, custodial services, and market-making. He said the mingling of services was not in the clients’ best interest.
Gensler said that Crypto faces challenges as platforms are trading ahead of their clients and trading against their customers because they are market marking against them.
The regulator has also raised the issue with digital assets such as large stablecoins pegged against the U.S. dollar or any other fiat currency. The USD Coin, Tether, and the Binance USD are affiliated with exchanges.
According to Gensler, all the three big stable coins were found on the trading platforms to facilitate trading. It was not a coincidence they were there as these exchanges try to avoid KYC and AML about knowing your customer and anti-money laundering controls.
With a market capitalization of $83 billion, Tether is the largest stablecoin tied to the Bitfinex crypto exchange. USDC is another stablecoin issued by a consortium of companies, including Coinbase Global Inc. The biggest crypt exchange Binance is linked to Binance USD, which has a market value of $17 billion.
Binance responding to Gensler’s comment referred to a blog that mentions that its stablecoin is transparent among the user community and follows strict guidelines. Bitfinex did not immediately reply to the request for comment, while Coinbase declined.
Coinbase shares fell on Tuesday after revenues in the first quarter fell short of estimates. The company warned that its trading volume would also be lower this quarter than the last one. Since achieving an all-time high in November 2021, Bitcoin has also declined by more than 50%.
Concerns mounted around stablecoins on Capitol Hill last week after UST or TerraUSD lost its pegging to the dollar. UST is an algorithmic stablecoin which implies that it is not backed by cash or cash equivalent assets, and its value depends on treasury management and trading volume.
According to Senator Mark Warner in an interview on Tuesday, the entire development demonstrates the need for a specific framework to assure investors that stablecoins are stable. Warner, a Democrat from Virginia, feels that the disruption in the market will allow the overheated balloon to cool down.
