Gary Gensler, the chairman of the US Securities and Exchange Commission (SEC), believes that crypto lending platforms do not comply with the country’s financial regulations. Gensler says in a new editorial in the Wall Street Journal that crypto should not be treated differently from the rest of the capital markets just because it uses a different technology. “We can dispense with the idea that crypto lending is not subject to regulation.
On the contrary, the rules have been in place for decades. The platforms do not follow them. Default is not the inevitable result of the crypto business model or the underlying cryptographic technology”. Gensler’s comments come after several high-profile crypto lending companies imploded in recent weeks. In July, beleaguered crypto brokerage Voyager Digital filed for Chapter 11 bankruptcy after a prominent borrower defaulted on a sizeable loan.
And about a week later, crypto lender Celsius filed for Chapter 11 bankruptcy after stopping all withdrawals from its platform. In a New York bankruptcy court, the company disclosed a $1.19 billion shortfall on its balance sheet between assets and liabilities. Last month, the SEC chairwoman took aim at crypto exchange platforms. Gensler said the stock market and crypto exchanges should offer similar protections to consumers. He also raised the possibility of regulating the market-making aspect of crypto exchanges out of existence. “Crypto trading platforms can also act as market makers.
It means that when you sell your tokens, one of the platforms can be buying on the other side. Exchanges don’t. They don’t serve as market makers market because this creates inherent conflicts of interest. So again I asked the staff if it would be appropriate to separate the market making functions of these crypto platforms.