SEC Chair Gary Gensler Attacks Crypto Exchanges. Claims “Unqualified Custodians”
WASHINGTON, DC - JULY 18: Chairman of the Commodity Futures Trading Commission Gary Gensler leaves after a meeting of the Financial Stability Oversight Council (FSOC) July 18, 2012 at the Treasury Department in Washington, DC. Members of FSOC voted during the meeting on a report to Congress regarding a study of contingent capital required by the Dodd-Frank Act, and also voted on the Council's annual report. (Photo by Alex Wong/Getty Images)
The United States Securities and Exchange Commission is continuing their regulation by enforcement tirade against the cryptocurrency markets, it seems that there are new intents being announced by the SEC weekly. For example, February of 2023 Gary Gensler announced that they would be taking enforcement actions against stable coins, which resulted in Coinbase actually delisting BUSD from their platform in fear of being attacked by the SEC, however Coinbase claimed this was about “liquidity concerns”.
Today, the SEC has turned their focus to cryptocurrency exchanges, stating that they are potentially unqualified custodians. Moreover, he spoke on the important changes that should be made to existing cryptocurrency protection rules. “Just because a crypto trading platform claims to be a qualified custodian doesn’t mean that it is.” -Gary Gensler quote from Advisory Committee today
This comes directly after the SEC fined Kraken exchange $30M for their cryptocurrency staking services.
“Based upon how crypto trading and lending platforms generally operate, investment advisers cannot rely on them today as qualified custodians,” Gensler told the committee. Additionally stating, “To be clear; just because a crypto trading platform claims to be a qualified custodian doesn’t mean that it is.”
Moreover, Gensler noted congressional backing of the SEC to potentially change existing custodial regulations. “The proposal takes up Congress’s 2010 provision for us to expand the custody rule to cover all of an investor’s assets, not just their funds or securities.”
“Congress granted us new authorities to expand the custody rule in response to the financial crisis and Bernie Madoff’s frauds. The expanded custody rule would help ensure that advisers done inappropriately use, abuse, or lose investors’ assets,” Gensler concluded.
