Crypto businesses don’t properly safeguard their customers’ assets and often mix them with their own funds, according to Securities and Exchange Commission Chair Gary Gensler, Bloomberg News reported. “This is largely a noncompliant field,” Gensler said. “They’re commingling customer funds with their businesses.” The blunt assessment by Wall Street’s main watchdog follows months of warnings by Gensler and U.S. regulators over potential dangers posed by the digital-asset industry. The SEC has asserted that many tokens and crypto products are really just securities that trade on the blockchain and should be registered with the agency. On Thursday, the regulator announced that the trading platform known as Kraken had agreed to pay a $30 million penalty to settle allegations that its staking products for American clients violated SEC rules. The firm, which also agreed to discontinue them in the U.S. as part of the deal, didn’t admit or deny the regulator’s claims. Crypto staking works by letting users generate yields in return for allowing their tokens to be used to facilitate transactions on a blockchain. Like several other digital-asset products, the SEC has said that it can resemble a security that should be registered with the agency. In his Bloomberg interview on Friday, Gensler took particular issue with how crypto exchanges often play multiple roles. He suggested that their business models can create significant conflicts of interest. Read more.
In related news, Federal Reserve Governor Christopher Waller said on Friday that he views crypto as a speculative asset that's worth whatever the next person is willing to pay for it and says he, personally, wouldn't hold it, YahooFinance.com reported. "To me, a crypto-asset is nothing more than a speculative asset, like a baseball card," Waller said. "If people want to hold such an asset, then go for it," Waller said. "I wouldn't do it, but I don't collect baseball cards, either. However, if you buy crypto-assets and the price goes to zero at some point, please don’t be surprised and don’t expect taxpayers to socialize your losses." Waller said that it's critical to make sure that the risks associated with crypto are mitigated, but that regulators shouldn't "unduly limit" the development and potential future uses of any positive features of crypto. Read more.
