The US Securities and Exchange Commission (SEC) Chief Gary Gensler on Tuesday took a shot at crypto exchanges, asserting that they are trading against their customers by “commingling” different services such as custody, market-making, and offering a trading venue.
In a recent interview with Bloomberg, the SEC chief reiterated that he believes most crypto exchanges are currently offering services that fall under the commission oversight. However, a majority of them have failed to register with the SEC.
Gensler highlighted consumer protection issues with crypto exchanges, emphasizing that “crypto’s got a lot of those challenges — of platforms trading ahead of their customers”. Gensler added that crypto exchanges are in fact, “trading against their customers often because they’re market-marking against their customers”.
SEC Chair Criticizes Stablecoins; Binance Responds
The SEC chair also hinted at the centralized nature of stablecoins, which would in turn, make them liable to SEC’s securities regulations. Gensler pointed out that the three largest stablecoins — Tether (USDT), USD Coin (USDC), and Binance USD (BUSD) are all affiliated with leading crypto exchanges.
He said, “I don’t think that’s a coincidence”, further adding that “each one of the three big ones was founded by the trading platforms to facilitate trading on those platforms and potentially avoid AML and KYC”. While USDT is linked to the Bitfinex crypto exchange, USDC was issued in collaboration with crypto exchanges including Coinbase. Furthermore, the crypto exchange giant Binance is directly connected with BUSD.
Binance responded to Gensler’s allegations in a blog post that was published soon after his interview. While the crypto exchange’s post did not make any direct comments on Gensler’s remarks, it clarified that BUSD has gained the crypto market’s confidence by “adhering to strict guidelines and remaining transparent with the user community, BUSD continues to meet user expectations through the recent climate of de-pegging events”.