Several BAYC and CryptoPunks collectors who put up their tokens as collateral backing for Ethereum loans have been unable to settle their dues. Crypto analysts believe this could mark the onset of the first major liquidation crisis in the NFT industry. BendDAO Loans and Possible Risks Rumors of a liquidation spiral began earlier this week following a post about NFT lending platform BendDAO. BendDAO is a web3 protocol that allows users to take out loans in Ethereum using their non-fungible…
Gary Gensler – Chairman of the Securities and Exchange Commission – recently outlined the investment risks associated with crypto trading platforms.
He said they resemble the structure and function of stock exchanges, and ought to be regulated in the same manner.
- In a video posted Thursday, Gensler explained that crypto platforms, like stock markets, bring buyers and sellers together. Millions of customers regularly trade on such platforms without operating through a broker.
- As such, he argues that crypto platforms should offer the same protections as equities markets. SEC staff are now working with such platforms to see them regulated and registered while seeing applicable crypto tokens registered as securities.
- He added that crypto trading platforms hold all users’ crypto on their behalf, providing risks unseen in traditional markets. The chairman likened this to “handing all of your stock to the New York Stock Exchange.”
- Finally, crypto exchanges operate as market makers. In other words, when one sells his tokens, the platform may be buying on the other side. Gensler proposes segregating these two functions, in order to eliminate conflicts of interest.
“Over the years, U.S. capital markets have become the gold standard because… they’re protected against fraud, manipulation, front-running, and the like,” he said. “They’re not perfect, but they’ve stood the test of time.”
- Gensler is famous for arguing that most cryptocurrencies in existence right now are securities. The only cryptocurrency he has been willing to publicly label a commodity is Bitcoin.
- However, the Commodities and Futures Trading Commission chairman thinks many tokens are commodities. Meanwhile, industry leaders have suggested making entirely different rules and classifications for digital assets.
- Gensler disagrees with the latter approach, however.
There’s no reason to treat the crypto market differently just because a different technology is used,” he said in the video. “We should be technology neutral when it comes to investor protection.