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Crypto Exchanges – A boon or A Bane!

 

Crypto Exchange and its deep-rooted mismanagements.

Crypto Exchanges are the trading centers of the crypto currencies for other assets. Crypto Exchange also act as a broker, facilitating trade of cryptocurrencies between buyer and seller and earn commission through such trade. While SEC (Securities and Exchange Commission) govern the activities of the exchanges, its quite obvious that absence of a strict frame work has increased the instances of mismanagement in these exchanges. Gary Gensler one of the Chairman of SEC, said “Crypto Agencies or Exchanges are not putting proper walls between their different parts of business such as custody, market making and offering a trading revenue.” He is also of the opinion that mingling all the customers services might have severe repercussions and might not be in the best interest of the client.

 

What are the issues raised by SEC against the exchanges? Let’s find out!

The SEC has raised many questions against the management of exchanges in regards with stable coins, digital assets that are generally pegged to the dollar or another fiat currency. The key focus of SEC is on three major stable coins – Tether, USD Coin, and Binance USD. The SEC is also of the view that, the mismanagement in these three stable coins is not a mere coincidence and each of them are founded to facilitate trading on those platforms without any kind of KYC or AML.

 

Response of Stable coins to SEC.

In response to SEC’s comments one of the top stablecoin Binance said that they follow strict guidelines and try to remain transparent with their investors to the best of their potential. Since SEC is developing strict framework for these exchanges to follow, only then any kind of mismanagement of these exchanges can be brought into light.

 

SEC’s Framework:

SEC's Frame Work

Picture Credits: Medium

SEC’s chairman Gary Gensler announced several initiatives during his speech. The main aim of SEC is to protect the investor in the crypto market. In his speech, he also mentioned that, moving forward, SEC will register and regulate all the crypto exchanges and will look out at separating the asset custody to minimize investors risk. A major hole in the crypto market was made by scammers and hackers, when they managed to stole approximately $14 Billion. An attempt to curb such instances is also been made by SEC. In such an attempt, Gensler said that SEC is going to partner with the Commodity Futures Trading Commission to address the security issues with regards to commodity tokens. Finally, SEC believes that, Crypto market is no different to that of conventional securities market and the investors have to be protected at any given cost.

Conclusion:

I can conclude that, as of today, there are more issues to be solved in the crypto exchanges and SEC is making a valid attempt.

 

 

 

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