- SEC Chair Gary Gensler savaged the cryptocurrency ecosystem yesterday
- Gensler said that the space was full of “fraud, scams, and abuse”
- He did praise Bitcoin, saying “it has been and could continue to be a catalyst for change in the fields of finance and money”
When Joe Biden recommended Gary Gensler to be the next Securities and Exchange Commission (SEC) chairman, the cryptocurrency world was somewhat pleased. Gensler had never spoken out about cryptocurrencies like other public officials and even taught blockchain and cryptocurrency at MIT’s Sloan School. Things were looking up. Yesterday however, Gensler burst any bubbles of hope the crypto world had over potential leniency regarding crypto regulation when savaged the ecosystem in front of the Aspen Security Forum, calling it a “Wild West” full of “fraud, scams, and abuse in certain applications” that needed regulation as a matter of “priority”.
Gensler Savages Crypto Uptake
Gensler has mentioned regulating cryptocurrency markets in the past, but never has he taken such a strong tone against the space. Gensler had been asked to speak to the Aspen Security Forum on the subject of cryptocurrency’s intersection with national security at a time when the U.S. is reeling from a series of ransomware attacks, so it was never going to be a pro-privacy, pro-freedom discussion.
Indeed, Gensler went on the offensive, calling the cryptocurrency world “a lot of hype masquerading as reality” and criticized their uptake:
We also haven’t seen crypto used much as a medium of exchange. To the extent that it is used as such, it’s often to skirt our laws with respect to anti-money laundering, sanctions, and tax collection. It also can enable extortion via ransomware, as we recently saw with Colonial Pipeline.
DeFi and Stablecoins Get Equal Treatment
Gensler also cited the DeFi movement, which he said was essentially an entire unregulated banking system, and compared stablecoins to “securities and investment companies”, adding that they “facilitated those seeking to sidestep a host of public policy goals connected to our traditional banking and financial system.”
When it came to how to regulate the space, Gensler was equally equivocating:
In my view, the legislative priority should center on crypto trading, lending, and DeFi platforms. Regulators would benefit from additional plenary authority to write rules for and attach guardrails to crypto trading and lending.
Honeymoon is Officially Over
Gensler did show some appreciation of Bitcoin, stating that “Nakamoto’s innovation is real […] Further, it has been and could continue to be a catalyst for change in the fields of finance and money.” This was about as positive as it got for crypto, however.
With Gensler’s speech the tide of crypto regulation just got magnitudes stronger and larger, and if Gensler and the crypto world had been enjoying a honeymoon period, that is now most definitely over.
