The SEC is launching an investigation to look into how cryptocurrency exchanges prevent insider trading, according to a whistleblower. At least one entity has been asked for clarification.
The chairman’s concerns
As FOX Business reports, citing a person with knowledge of the SEC’s actions, the Securities and Exchange Commission sent a letter to one of the large cryptocurrency exchanges. In this letter, they asked for information on how it protects its users from insider tading.
According to popular belief, this type of letter could have been sent to up to several different entities. However, both Coinbase, Binance, FTX, and Crypto.com declined to comment on the matter. The SEC has also not issued any official statement, which makes this case quite mysterious.
SEC Chairman Gary Gensler, has long expressed concerns about cryptocurrency exchanges, whose position and wide range of services they provide, have the right to influence the market valuation of many coins. As he mentioned in an interview, for the Bloomberg news agency: “exchanges have all the tools to effectively trade against their customers”.
The unclear nature of the investigation
It is not certain for what purpose the SEC is requesting this information. However, two scenarios seem highly likely. One of them is to look for clues based on which the SEC could initiate proceedings against a particular entity. The other is merely a routine compliance check.
In this way, SEC officials want to be sure that exchanges are not using confidential information, such as upcoming listings for new tokens, to pump up their price before the event is announced. This is to prevent crypto exchanges from abusing new token launches and making massive sales and money on their users.
Recent events a catalyst for scrutiny and regulation?
Many market observers note that the current events surrounding SEC activity in the crypto space may be fueled by the unfortunate events with which the crypto industry has been shrouded. We are primarily talking about the collapse of LUNY and its related stablecoin Terra UST. The problems of the Celsius platform are also not going unnoticed. This causes the Securities and Exchange Commission to increasingly glance in the direction of the crypto industry, and numerous experts herald the end of the times of so-called low regulation. What impact will this have on the market, products and investors? We may be about to find out.