The head of a Wall Street regulator told CNBC in an interview on Thursday that the US Securities and Exchange Commission (SEC) is working to properly register some cryptocurrency companies if they operate more as investment firms.
SEC Chairman Gary Gensler also said that it is up to large financial institutions to decide whether they want to include crypto options in their portfolios for clients, but the risks of crypto tokens need to be made public.
“We have focused on this area because many of these firms… well, investment companies are taking hundreds of thousands or even millions of clients’ funds, pulling it all together, and then selling it while offering very high returns. Looks like an investment company, or bank, you might say,” Gensler said.
“How are they doing that? What’s behind those promises? We’re going to work with industry to get these firms properly registered under securities laws.”
Cryptocurrency companies have said they are unsure of US regulations governing products that allow customers to earn interest on holdings rather than trade them.
The focus on cryptocurrency markets has intensified again since May, amid recent periods of volatility that have long kept a watchful eye.
Several crypto lenders have stumbled in recent weeks amid falling crypto prices. Celsius Networks has filed for bankruptcy. BlockFi signed a deal with FTX that gives the crypto exchange the option to buy BlockFi for up to $240 million.
Companies that have been exposed to cryptocurrencies have previously warned that the coin’s price could have ramifications, including triggering margin calls.
Meanwhile, as the US Federal Reserve begins raising rates to combat inflation, investors have fled the crypto markets.
Thursday’s comments follow Gensler’s repeated statements that in his view certain crypto trading platforms may meet the definition of “securities” and should be traded and regulated as such.
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