SEC Warns Cryptocurrency Platforms To Abide By The Law After FTX Collapse

Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), said in an interview on December 7 that FTX misappropriated customer funds and conducted internal transactions with its affiliated hedge fund Alameda Research, which violated US securities laws. Cryptocurrency exchanges must properly manage client funds following existing securities laws and should not become broker-dealers or hedge funds and set up another exchange platform simultaneously. Last month, 9 days after the scandal broke, FTX, previously known as the “federal reserve of digital currency,” collapsed. Lawmakers have been accusing the SEC of negligence and failure to regulate FTX. Democratic Senator Elizabeth Warren has called on the SEC to crack down on fraud in the cryptocurrency space. The SEC and DOJ are reportedly investigating FTX for criminal and civil violations.

Gensler should have disclosed whether the agency will formulate new rules next year to strengthen cryptocurrency supervision and deal with frequent platform crashes. So far, the SEC has taken over 100 enforcement actions against cryptocurrency platforms and will continue implementing the existing rules and regulations before the new ones are issued. According to Coinmarketcap, as of the afternoon of the 7th, the total value of encrypted assets has dropped from 2 trillion US dollars at the beginning of the year to about2trillionUSdollarsatthebeginningoftheyeartoabout840 billion US dollars. Under the framework of US securities laws, many cryptocurrency platforms are currently facing legal challenges to the existing rules and regulations.