KEY POINTS

  • Gary Gensler said crypto platforms should be registered with the SEC
  • He believes market-making features cause "inherent conflicts of interest"
  • He has asked his staff to consider segregating platforms' market-making functions

The Chairman of the United States Securities and Exchange Commission (SEC) has said there is "no difference" between crypto and securities exchanges, so they should be treated the same under the financial regulator's jurisdiction.

Gary Gensler made the statement in a video he posted on Twitter Thursday. In the clip, he said that "crypto platforms, like stock platforms, bring together buyers and sellers" and therefore, these exchanges, which have millions of retail customers buying directly through them without facing a broker, should be registered with the SEC.

"If a company builds a crypto market that protects investors & meets the standard of our market regulations, people will more likely have greater confidence in that market," he wrote in the tweet.

Gensler also said in the video that there is "no reason to treat the crypto market differently [from the securities market] just because a different technology is used," adding that regulating the crypto market in any different manner would "risk undermining 90 years of securities law."

Furthermore, the SEC Chair asked crypto investors to be careful while putting their cryptocurrencies in the direct custody of exchanges. "Imagine handing over all of your stock to the New York Stock Exchange — that would never fly," he said.

Gensler then acknowledged that some exchanges also function as market makers, which means that when you sell a cryptocurrency, "one of the platforms may be actually buying on the other side." He believes this might create "inherent conflicts of interest."

He added that he has asked his staff "to consider whether it'd be appropriate to segregate out the market-making functions of these crypto platforms."

Gensler made similar remarks regarding the market-making capacity of crypto exchanges in an interview with Bloomberg in May.

"Crypto's got a lot of those challenges — of platforms trading ahead of their customers. In fact, they're trading against their customers often because they're market-marking against their customers," he said at the time.

SEC Chair Gary Gensler endorsed a revamp of the trading system following the Gamestop frenzy
SEC Chair Gary Gensler endorsed a revamp of the trading system following the Gamestop frenzy GETTY IMAGES NORTH AMERICA via AFP / CHIP SOMODEVILLA
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