SEC Chair Criticizes Crypto Exchanges, Highlights Regulatory Gaps

SEC Chair Gary Gensler has voiced concerns over the operations of crypto exchanges, contrasting them sharply with traditional platforms like the New York Stock Exchange (NYSE). In a recent CNBC’s Squawk Box interview, Gensler emphasized that crypto exchanges fail to provide the necessary investor disclosures mandated by law.

Gensler argued that crypto tokens lack the transparency required for informed investment decisions. “Right now, without prejudging anyone, these tokens have not given you the disclosures that you not only need to make your investment decisions but also that are required by the law,” he stated. He highlighted that the fundamental principle of the securities markets is investor protection through comprehensive disclosure, a standard not met by the crypto market.

He further elaborated, “It’s a basic concept in our securities markets… and what President Roosevelt did is he created this commission to oversee that you, the investors, get disclosure, and in the crypto markets, they aren’t giving you that disclosure.”

Unregulated Trading Practices

Gensler also criticized the trading practices of crypto exchanges, noting that they engage in activities that would be prohibited on regulated platforms like the NYSE. “Exchanges, like the floor of the New York Stock Exchange, get properly regulated to protect against fraud and manipulation, and they don’t trade against you. And these crypto exchanges are doing things we would never allow the New York Stock Exchange to do. Our laws don’t allow you to trade against your customers,” he remarked.

Addressing the approval process for spot Ethereum (ETH) exchange-traded funds (ETFs), Gensler indicated that while ETH has been traded on the Chicago Mercantile Exchange for over three years, the path to ETF approval involves thorough bitcoin scrutiny and will take time. “The staff looked at that closely and that was approved. Now the underlying exchange-traded products still need to go through a process to have a disclosure about that and that will take some time and they’re working on that,” he explained.

The SEC’s approval of Bitcoin (BTC) ETFs in January has already paved the way for substantial inflows into the top crypto asset by market cap. This move is expected to influence the broader acceptance and regulation of cryptocurrency investment vehicles.