Investors should not believe they own their crypto tokens, according to Gensler, because using a digital wallet on a platform constitutes a transfer of ownership to the platform.
“If the platform goes down, guess what? You just have a counter-party relationship with the platform,” Gensler said. “Get in line at bankruptcy court.”
According to the SEC chair, the digital asset class is not sufficiently decentralized, citing a small handful of important trading and lending venues that manage the majority of crypto-asset traffic.
Gensler argued for fundamental investor safeguards like market integrity, a ban on front-running customers, and anti-manipulation and fraud.
He also stated that crypto platforms frequently trade and make markets against investors.
He said, “When [the platforms] take your custody when they take those tokens, they can use them, they can trade them. It’s not like when you trade in the equity markets,” Gensler said. “They’re making markets against you.