US SEC Chairman Gary Gensler says cryptocurrency crackdown is just getting started

The US Securities and Exchange Commission (SEC) believes that existing rules are adequate for cryptocurrencies. Gary Gensler, the chair of the SEC, argues that the crypto community needs to ensure that firms comply with existing securities laws. FTX exchange's swift collapse has prompted urgent calls in Washington DC for legislation to rein in the digital asset industry. 

Also read: US SEC calls FTT a security, Sam Bankman-Fried former associates plead guilty

US SEC Chair argues FTX exchange collapse highlights need for compliance

The US Securities and Exchange Commission, an independent agency of the United States federal government, believes that existing crypto rules are adequate but issuers and exchanges need to ensure compliance. The Chairman of the financial regulator said that existing rules are adequate for cryptocurrency firms. 

Gary Gensler argues that pending charges against the FTX exchange set an example for the community about the need of having operations compliant with existing securities laws. The collapse of the bankrupt FTX exchange founded by Sam Bankman-Fried poses a warning to crypto issuers and exchanges that are not registered with the SEC. Gensler believes these firms could soon find themselves facing enforcement actions. 

The SEC settled civil fraud charges with Sam Bankman-Fried’s aides Gary Wang and Caroline Ellison, two former executives of the FTX empire. Gary Wang is a co-founder of the cryptocurrency and Ellison is the chief executive of FTX’s trading arm, Alameda Research, which used billions in customer funds to back its risky trades. 

Sam Bankman-Fried’s aides pleaded guilty to criminal fraud charges filed by federal prosecutors in their investigation of the cryptocurrency exchange. The now-bankrupt trading platform once ranked among the world’s largest cryptocurrency platforms in the world.

The platform’s collapse kicked off a series of investigations by the Justice Department and the SEC focused on whether the exchange commingled funds with Alameda Research, another business co-founded by SBF. 

Gary Gensler said, 

Financial history would tell you that most of these tokens [native tokens of crypto exchanges] will fail. [Insiders] sell the public on an idea while they’re potentially fraudulently pumping up the stock. This leads to distorted incentives and puts the public further at risk of the token not being properly registered and having proper disclosures and complying with the various provisions of the securities law about anti-fraud and anti-manipulation.

The Securities and Exchange Commission Chairman said he supports legislation that regulates cryptocurrency sectors like stablecoins. The US Securities law is robust and covers much of the activity in the crypto ecosystem, not limited to tokens, but particularly including intermediaries in cryptocurrency securities.