Cryptocurrency exchanges face a long battle with the SEC, with clients urged to “withdraw from using them immediately.” This was stated by former agency lawyer John Reed Stark.
Get out of crypto platforms now, I can’t say it any plainer. Having worked as an attorney in the SEC Enforcement Division for almost 20 years (including 11 years as Chief of the SEC Office of Internet Enforcement), I believe that we now know for certain that crypto trading…
— John Reed Stark (@JohnReedStark) June 8, 2023
The expert reacted to the latest industry developments—the agency’s actions against Binance and Coinbase.
“I believe that the SEC is impeccable in its efforts to enforce laws relating to digital assets. It doesn’t matter what the ‘gaudy touts’ promise, the axiom is that platforms carry high risks and are inherently unsafe. … Crypto exchanges have found themselves under siege by U.S. regulators, and it has only begun,” — he stressed.
Stark explained that his position is based on the absence of registration [by platform operators] with the SEC, which points to a lack of oversight.
“There are no gaps in protecting customers, only a chasm,” — said Reed Stark.
The expert cited issues with crypto exchanges’ accounting practices, as well as their failure to comply with order-flow requirements.
Reed Stark stressed that there is no internal incentive for firms to follow U.S. laws prohibiting market manipulation, insider trading, operations against customers and other misconduct.
According to the expert, there are no requirements for cybersecurity or privacy protection, internal obligations to comply, provisions governing handling of customer complaints, or any minimum financial standards for carrying out transactions.
Earlier, Reed Stark explained the reasons behind the “collapse of cryptocurrencies”.
As noted, trading volumes on CEX in May fell to their lowest since October 2020 around $424 billion.