- The Commission could be tracking any potential law violations by crypto exchanges
- The Securities and Exchange Commission has launched an investigation on crypto exchanges
- The collapse of the Terra UST stablecoin could have prompted the investigations
In a bid to prevent insider trading, the United States Securities and Exchange Commission (SEC) has launched an investigation on crypto exchanges.
The probe was initiated to have an overview of what cryptocurrency exchanges are doing to prevent insider trading.
According to a report, SEC had issued a letter to all the major crypto exchange platforms.
The letter was requesting detailed information about the exchange’s strategies against insider trading.
Are there any potential law violations?
It is not clear which specific cryptocurrency exchange platforms were targeted. Major crypto exchange sites like FTX, Crypto.com, Binance, and Coinbase refused to comment on the matter.
The Commission could be tracking any potential law violations by crypto exchange platforms through litigation.
Other reports claim that SEC could be seeking a routine compliance check through the Department of Compliance Inspection and Examinations.
The main trigger of this move was the allegations of insider trading of NFTs at OpenSea. OpenSea is a crypto exchange market that deals with the exchange and trading of non-fungible tokens (NFTs).
According to Jeremy Hogan of Hogan & Hogan Law firm, SEC’s probe stems from allegations of insider trading of shortlisted tokens. This probe gives the commission enough powers to have control over crypto exchanges.
Once the proposed bill for the Digital Commodity Exchange Act of 2022 is passed, the regulatory authority will be configured. The Commodity Futures Trading Commission (CFTC) will oversee the operations of all crypto exchanges and stable coin providers.
What prompted the move by SEC?
With the current market scandals and theft allegations in the Crypto world, SEC had no choice but to intervene.
In May, the collapse of the Terra USD Classic (USTC) and the Luna Classic (LUNC) affected many users.
Recently, Celsius, the decentralized finance lending platform was involved in a scandal. Users cited freezing of user withdrawal funds and potential insolvency cases. This comes after a huge transfer of crypto to the FTX exchange.
SEC under the constitution is tasked with regulating the securities and exchange markets. It protects investors from fraudulent practices and monitors corporate takeovers in the United States.
Just recently Binance was in the spotlight. The securities and exchange commission (SEC) was investigating Binance for allegedly failing to register with the agency.
It is recommended that issues about securities offered in interstate trading must be registered with the SEC before selling to investors.
Financial service providers like brokerage firms, securities firms, asset managers, and advisory firms must be registered with SEC. The Commission is responsible for any approval of a crypto exchange platform.
