US Securities and Exchange Commission (SEC) Chairman Gary Gensler says the way crypto exchanges are structured could work to the detriment of users.
In a new Bloomberg report, Gensler notes that unlike traditional finance, cryptocurrency exchanges have not made clear distinctions between different aspects of their service.
Because exchanges are responsible for custody of assets, settling transactions on both sides of a marketplace, and providing the trading floor for traders, Gensler is concerned that such “mixing” could harm customers.
“Crypto has many of these challenges – platforms act before their customers.
In fact, they often trade against their customers because they are market marking against their customers.”
The SEC chairman is also targeting so-called stablecoins, which aim to peg 1:1 to the US dollar, noting that the three largest stablecoins are all owned by crypto exchanges — namely, Bitfinex’s Tether (USDT)the US dollar from Coinbase Coin (USDC) and Binance Coin (BUSD).
Gensler says he’s concerned exchanges could allow anti-money laundering (AML) and know-your-customer (KYC) rules to be circumvented in the process.
“I don’t think it’s a coincidence. Each of the big three was created by the trading platforms to facilitate trading on those platforms and potentially avoid AML and KYC.”
Yesterday, the Federal Reserve also weighed the risks associated with stablecoins in a lengthy and far-reaching report on financial stability. The Fed mentions the possibility of central bank digital currencies (CBDCs) fulfilling the role of stablecoins, but with government rules and secure hedging.
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Source: Crypto News Deutsch