US Securities and Exchange Commission (SEC) Chairman Gary Gensler has revealed that the regulator will use all available tools to bring crypto platforms into compliance with its rules. Further, the SEC chief said: “Proof of reserves is neither a complete accounting of a company’s assets and liabilities, nor does it satisfy the segregation of client funds under securities laws. .”
SEC Chairman Gensler on Crypto Regulation
SEC Chairman Gary Gensler has stressed the importance of bringing crypto platforms into compliance after securities regulator filed a complaint against former Alameda Research CEO Caroline Ellison and former FTX executive Gary Wang for their role in defrauding equity investors. The SEC boss tweeted on Wednesday:
Until crypto platforms comply with proven securities laws, the risks for investors will persist. It remains a priority for the SEC to use all of our available tools to bring the industry into compliance.
In an interview with Bloomberg on Thursday, Gensler indicated that the SEC is just beginning its crackdown on crypto firms that don’t follow its rules.
“The trail is getting shorter” for crypto firms to come in and register with the SEC, Gensler explained, noting, “Casinos in this Wild West are non-compliant middlemen.”
The SEC chief also commented on the proof of reserves (POR) reports used by a number of crypto exchanges, including Binance, to prove that they have enough funds to complete customer withdrawals. Noting that this practice falls short of the disclosures necessary to protect investors, Gensler explained:
Proof of reserves is neither a complete accounting of a company’s assets and liabilities nor satisfies the segregation of client funds under securities laws.
Gensler suggested that crypto firms should “give customers confidence that their crypto is really there” by “complying with proven custody rules, segregation of customer funds, and accounting rules.” The SEC focuses on maintaining the financial records of crypto firms.
The securities watchdog and its chairman have been heavily criticized by some for their law enforcement-centric approach to regulate the crypto industry. They were also scrutinized In the collapse of crypto exchange FTX since Gensler and SEC staff repeatedly met with former FTX CEO Sam Bankman-Fried (SBF).
Congressman Tom Emmer (R-MN) tweeted Thursday: “Gary Gensler and the SEC had more meetings with SBF and FTX/IEX than anyone else in crypto, allegedly to create a special regulatory framework designed to only benefit FTX. The legislator further wrote:
Making behind-the-scenes regulatory deals with bad actors is not part of the SEC’s toolbox.
Congressman Emmer said last month that the FTX fallout was not a crypto failure, but the failure of the SEC and Chairman Gensler. The Minnesota lawmaker called on Gensler to bear witness before Congress on the cost of its regulatory failures.
Last week, the SEC chief stressed the importance of regulating crypto issues and media. He previously stated that most crypto tokens are securities but the crypto field is significantly non-compliant. The securities regulator recently released its strategic plan for the next four years and crypto is among its the priorities. Gensler said in November that the SEC’s enforcement division remained focused on crypto.
What do you think of SEC Chairman Gary Gensler’s statements on crypto regulation? Let us know in the comments section below.
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