John Reed Stark, former chief of the US Department of Internet Enforcement Securities and Exchange Commission (SEC), warns investors to avoid assets of crypto exchanges to pick up.
stark tweeted that crypto exchanges are in the early stages of a regulatory and law enforcement offensive from the US. During the uncertainty, the former SEC employee recommends taking assets off platforms. BinanceUS and Coinbase appear to be the first exchanges to be targeted by the government agency. Despite his earlier criticism of the SEC, Stark praises the regulator’s recent enforcement actions on cryptocurrencies:
My view is that the SEC is doing the right thing with their crypto-related enforcement efforts. No matter what the others claim, it is clear that crypto exchanges are risky, dangerous and inherently insecure.
Exchanges fall short
According to Stark, crypto exchanges are inherently risky and insecure, regardless of what the platform’s founders promise. He claims that there is a ‘gap’ in the required protection of investors on these types of platforms. Due to the lack of regulation, exchanges fall short when it comes to record keeping, cybersecurity, codes of conduct, customer complaints and transaction orders. Additional regulations are desirable in that respect.
Stark further argues that these platforms currently have no reason to abide by US laws and regulations that prohibit manipulation, insider trading, dealing for clients, and other fraudulent conduct by clients or employees. He also believes that the SEC is currently unable to detect fraud at crypto exchanges. According to John, new regulations would make this possible:
It’s all straight forward and common sense. SEC filing establishes critical requirements that protect investors from individual risk and protect capital markets from global systemic risk. The requirements also make the US markets the safest, most robust, vibrant and most sought-after marketplaces in the world.