SEC Chair Gary Gensler on Crypto: 'It's Unlikely These Assets Will Function as Currency'

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has expressed scepticism about the future of cryptocurrencies like Bitcoin (BTC) being used widely as a means of payment. Instead, he believes they will be predominantly viewed as stores of value.

Gensler Advocates for Public-Driven Value Assessment of Cryptocurrencies Amid Regulatory Discussions

During an event at New York University School of Law, Gensler addressed a question regarding the potential utility of cryptocurrencies if they were fully regulated. He stated that the SEC is "merit neutral" and emphasised that the investing public should determine the value of cryptocurrencies based on disclosure.

Gensler drew on historical insights, mentioning that debates about currency date back to philosophers like Plato and Aristotle. He noted that historically, nations typically have one primary currency and often do not adopt multiple forms of currency.

Referencing Gresham's law, which posits that "bad money drives out good," Gensler explained that nations prefer a singular currency for its roles as a store of value, medium of exchange, and unit of account. He stated, “It’s unlikely this stuff is going to be a currency,” indicating that cryptocurrencies must demonstrate their value through actual use and disclosure, much like traditional securities on the stock exchange.

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Gensler Emphasises Regulatory Oversight as Essential in Combatting Fraud in the Cryptocurrency Sector

In a broader discussion with NYU Law Professor Robert Jackson, Gensler defended the SEC's proactive enforcement against cryptocurrency firms. He argued that without regulatory oversight, laws are less likely to be followed. He characterised the crypto landscape as being filled with "a lot of fraudsters, a lot of grifters, a lot of scams," highlighting the prevalence of unethical behaviour in the industry.

Gensler pointed out that many prominent figures in the crypto sector have faced legal repercussions, stating, “the leading lights of this field in [2024] are either in jail or awaiting extradition right now.”

Gensler Stands Firm on Current Regulatory Frameworks Amid Crypto Market ChallengesGensler

Despite ongoing challenges in the crypto market, Gensler does not see a need for new regulatory frameworks beyond the existing guidelines established by the Supreme Court in 1940, particularly the Howey Test. He elaborated that if someone is engaging with a central enterprise or broker-dealer regarding an asset, it indicates that the investment is likely an investment contract.

Gensler refrained from commenting on how the forthcoming presidential election might affect the SEC or his own future in the role, leaving uncertainties about the potential impact on regulatory direction.

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Gensler's insights underscore a cautious view on the viability of cryptocurrencies as currencies, highlighting concerns over fraud and the importance of regulatory oversight. However, his reluctance to adopt new regulations suggests a preference for existing frameworks, which may hinder the industry's development.