Gary Gensler (chair of the US Securities and Exchange Commission) states that too much leverage and lack of disclosure are two of the main factors that hurt the crypto industry.
The SEC Chair’s comments Thursday’s announcement comes at a moment when crypto is back in the spotlight. This time, it’s the shock of what has happened with the FTX crypto exchange.
CoinJournal earlier today reported that FTX was insolvent. This has only added to the regulatory attention and general rage in 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. FTX customers benefited from that money.
“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 had previously asked crypto exchanges and other providers for regulation to be more transparent to 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 can 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.
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