SEC Chair Gary Gensler stressed the importance of making crypto platforms compliant.
US Securities and Exchange Commission (SEC) Chair Gary Gensler has revealed that the regulator will use all available tools to make crypto platforms comply with its rules. Furthermore, the SEC chief said that “Proof of reserves is neither a full accounting of the assets and liability of a company nor does it satisfy segregation of customer funds under the securities laws.”
SEC Chair Gensler on Crypto Regulation
SEC Chair Gary Gensler stressed the importance of making crypto platforms compliant after the securities regulator filed charges against former Alameda Research CEO Caroline Ellison and former FTX executive Gary Wang, for their role in defrauding equity investors. The SEC chief tweeted on Wednesday the following:
“Until crypto platforms comply with time-tested securities laws, risks to investors will persist. It remains a priority of 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 cryptocurrency companies that don’t abide by its rules.
“The runway is getting shorter” for crypto companies to get in and register with the SEC, Gensler explained, emphasizing: “Casinos in this Wild West are non-compliant intermediaries.”
Gensler on PORs
The SEC chief also commented on the Proof of Reserves Reports (PORs) used by various crypto exchanges, including Binance, to prove that they have sufficient funds to meet customer withdrawals. Noting that this practice does not meet the necessary disclosures to protect investors, Gensler explained that “Proof of reserves is neither a full accounting of the assets and liability of a company nor does it satisfy segregation of customer funds under the securities laws.”
Gensler suggested that crypto firms should “give customers confidence that their crypto is really there” by “complying with time-tested custody rules, segregation of customer funds rules, and accounting rules.” The SEC focuses on maintaining financial records for crypto companies.
The securities watchdog and its Chair have been heavily criticized by some for their enforcement-focused approach to regulating the crypto industry. They have also been scrutinized in the collapse of crypto exchange FTX since Gensler and SEC staff held meetings with former FTX CEO Sam Bankman-Fried (SBF) multiple times.
Last week, the head of the SEC stressed the importance of regulating cryptocurrency issuers and intermediaries. Earlier he asserted that most crypto tokens are securities, but that the crypto field is not meaningfully compliant. The securities regulator recently published its strategic plan for the next four years, and crypto is among its top priorities. Gensler stated in November that the SEC’s Enforcement Division remains focused on cryptocurrencies.
By Audy Castaneda
