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Why Crypto Exchanges Should Expect Ongoing SEC Enforcement, Ex-Official Explains

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A former U.S. Securities and Exchange Commission (SEC) official, John Reed Stark, predicted that the financial regulator would continue with its regulatory onslaught against cryptocurrency exchanges.

In an August 12 long post on X (formerly Twitter), Stark detailed why he believes the “SEC’s crypto-enforcement sweep will never end.”

Why SEC Targets Exchanges

Stark stated that SEC regulatory crackdown on crypto exchanges was necessary because they are not registered. He noted that these platforms pose systemic risks to the broader financial system because they operate under no regulatory oversight.

Star mentioned that the SEC’s core mission was to protect investors, ensure fair markets, and facilitate capital formation. He further explained why exchanges, broker-dealers, and clearing agencies needed to register with the financial regulator. According to him, this registration subjects the firms to accountability, transparency, and anti-conflict rules.

“One reason for the SEC registrant of crypto trading platforms is to manage the litany of conflicts of interests which can arise when acting as a securities trading intermediary.”

However, Stark noted that crypto platforms provide these functions without registration, avoiding critical regulatory oversight and creating room for conflicts of interest. Thus, the SEC, which cannot monitor their activity and analyze data for fraud and risk, resorts to lawsuits.

Under Chair Gary Gensler, the SEC has brought several enforcement actions against crypto firms, including Coinbase and Binance, over their federal securities law violations. Chair Gensler has also consistently maintained that the crypto industry was rife with non-compliance.

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Author: Oluwapelumi Adejumo

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