Is the US Dollar Enough? The SEC’s Gary Gensler on the Relevance of Cryptocurrencies
The SEC Takes Aim at Binance and Coinbase
On Monday, Binance was hit with a lawsuit by the US SEC, with Coinbase joining the growing list of lawsuits the following day, as the SEC continues to crack down on violations in the crypto industry. In an interview with CNBC, SEC Director Gary Gensler provides insight into the SEC’s decision to sue these two major crypto trading platforms.
The Problem with Crypto Trading Platforms
Gensler explains that companies in the financial industry typically take on one specific role, unlike crypto trading platforms, which often combine multiple functions. For example, he notes that the New York Stock Exchange does not run a hedge fund like Binance’s sister company Merit Peak. Additionally, market making and trading should not be handled by the same company, as this can lead to wash trading, which involves artificially inflating trading volumes to make a company appear more successful than it really is. Binance has been accused of wash trading on several occasions.
Binance’s CEO May Have Broken US Law
Gensler alleges that Binance’s CEO, Changpeng Zhao, may have violated US law by trading cryptocurrency while running Binance, which would constitute market manipulation. Gensler acknowledges the length of time it has taken the SEC to sue the world’s two largest exchanges, citing the need to follow the facts and the law precisely.
Gensler Argues that Cryptocurrencies are Obsolete in the US
CNBC’s Jim Cramer questions Gensler’s view on cryptocurrencies, accusing them of being nothing more than hot air. In response, Gensler argues that there is no need for further digital currencies in the US, as the US dollar, the euro, and the yen are all digital already. He notes that people already invest in digital trading platforms, so the US has digital currency already, making cryptocurrencies redundant. Gensler believes that the crypto industry bypasses financial regulations and insists that it is necessary to compel exchanges to comply with the law.
The SEC’s recent lawsuits against Binance and Coinbase signify a shift in the regulatory landscape for the crypto industry. Gensler’s comments on the obsolete nature of cryptocurrencies in the US may raise further questions on the relevance of digital currencies in the current financial ecosystem.