Gary Gensler, the Chair of the US Securities and Exchange Commission (SEC) says lack of disclosure and too much leverage are two factors hurting the crypto industry.
The SEC Chair’s comments on Thursday come at a time when the crypto sector is firmly in the spotlight again. This time, it’s the shock of what has happened with the FTX crypto exchange.
As CoinJournal reported earlier today, FTX is insolvent and this just added the inreased regulatory attention and overall rage around the crypto community.
Leverage and no disclosure is a ‘toxic mix’
As has been reported widely, FTX’s implosion is down to Alameda Research’s blowing billions in trading, and leaving FTX with an $8 billion hole. That money belonged to FTX customers.
“When you mix together a bunch of customer money and borrowing against it, investors get hurt,” Gensler told Andrew Ross Sorkin on CNBC’s ‘Squawk Box’.
He added: “This is a very interconnected world in crypto with a few concentrated players. When markets turned on them it appears that a lot of customers lost money.”
Gensler has previously called on crypto exchanges and other providers to embrace regulation as well as offer more disclosures to better protect investors.
“It’s a field that’s significantly non-compliant, but it’s got regulation,” the SEC Chair said, pointing out that crypto investors from all over the world are getting rekt. And other than leverage, consumers are falling prey to promotions from celebrities and there isn’t much disclosure.
“This is not like the NYSE or Nasdaq. These platforms co-mingle. It’s a toxic combination where they take people’s money, they borrow against it. But not much disclosure, and then they trade against their customers,” ”he regulator explained.