In a Senate Appropriations Committee hearing today, SEC Chairman Gary Gensler warned that the controversial practices of the now-defunct crypto exchange FTX are not isolated incidents in the industry.
“That is not unique,” Gensler said, referring to FTX’s commingling of functions. “It’s happened in multiple places that there’s this commingling.”
Gensler emphasized the differences between traditional stock exchanges and crypto exchanges, noting that the latter often engage in activities that would be prohibited in the former.
“The NYSE can’t actually also run a hedge fund and trade against their customers or make markets ahead of their customers. But in the crypto field, that’s what’s happening on a lot of exchanges, they’re commingling all these functions,” he said.
Senator Bill Hagerty raised concerns about the lack of regulatory clarity in the US, which he believes has pushed crypto exchanges to operate offshore. Gensler disagreed, stating, “with all respect, that’s because they are choosing to try to not comply with US law that so well protects our capital markets.”Gensler maintained that the vast majority of crypto tokens are subject to existing securities laws, and that crypto exchanges are not giving the proper disclosures.
He concluded, “If I can say breaking the law and not liking the law are different than lack of clarity. And with all respect, I think that’s what we have a lot in this field.”
