US Securities and Exchange Commission (SEC) Chairman Gary Gensler has said lack of disclosure and excessive leverage are two factors hurting the cryptocurrency industry.
SEC Chairman’s comment Thursday is the time when the crypto sector is back in the limelight. This time it’s a shock that happened at the FTX virtual currency exchange.
As coin journalToday, it was reported that FTX was insolvent, which led to increased regulatory interest and anger throughout the crypto community.
Leverage and non-disclosure are a ‘toxic combination’
As widely reported, FTX’s implosion was caused by the Alameda Research deal blowing away billions of dollars, leaving FTX with an $8 billion hole. The money belonged to FTX customers.
“Mixing lots of customer money with borrowing against it hurts investors‘, Gensler told Andrew Ross Sorkin on CNBC’s Squawk Box.
he Added: “It’s an encrypted, highly interconnected world, with a few focused players.Many customers seem to have lost money when the market turned them on”
Gensler has previously urged cryptocurrency exchanges and other providers to embrace the regulation and provide more disclosure to better protect investors.
“Areas of significant non-compliance, but with regulation‘ said the SEC chairman, pointing to the outrage of cryptocurrency investors around the world. And aside from leverage, consumers have fallen prey to promotions from celebrities and not much has been disclosed.
“This is different from the NYSE and Nasdaq. These platforms are mixed. It’s a toxic combination where they take people’s money and borrow against it.But it’s not disclosed much and it’s doing business with customers‘ said the regulator.