Gary Gensler Reflects on Crypto and His SEC Tenure
Crypto’s Ongoing Challenges
In a revealing conversation on Bloomberg Markets with David Gura, outgoing SEC Chair Gary Gensler discussed his time in office and the evolving role of cryptocurrencies within the American financial landscape. With less than two weeks remaining in his term, Gensler maintained his firm perspective on the digital currency sector, labeling it as “filled with dubious players” and asserting that “a significant number won’t endure.”
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The ‘Wild West’ Nature of Crypto
Gensler began by acknowledging the criticism he has faced, noting, “Serving in this capacity is a significant honor,” and expressing gratitude to President Joe Biden for the opportunity as the 33rd SEC chair. He emphasized the importance of his work, stating, “You engage in crucial debates impacting 330 million Americans.”
When asked about the differing levels of scrutiny compared to his previous role at the Commodity Futures Trading Commission (CFTC) during the financial crisis, Gensler admitted, “The environment does shift.” Nonetheless, he reiterated the commission’s primary mission: “Advocating for everyday Americans by reducing market costs… It’s expected that some market players will have differing views and contest our actions.”
Crypto’s Minimal Footprint in US Capital Markets
Addressing the digital asset industry, Gensler reiterated a point he has often made: Cryptocurrencies account for less than 1% of the US capital markets, which he estimated to be approximately “$120 trillion.” Despite this small fraction, crypto has demanded substantial SEC attention.
Gensler stood by his earlier characterizations of the crypto market as the “Wild West,” highlighting its foundation on non-compliance. He cited enforcement actions taken during his and predecessor Jay Clayton’s tenures. “Jay initiated 80 cases in this sector. We’ve pursued roughly 100 in four years,” Gensler noted, adding that these account for about 5% of SEC enforcement activities, with the rest targeting conventional fraudsters.
The Dual Nature of Digital Assets
Gensler divided the crypto domain into two segments, emphasizing its volatility and sentiment-driven nature. He stated, “This arena is plagued with malefactors. Public awareness is largely confined to Bitcoin, which constitutes around two-thirds to 80% of crypto’s market value, with the rest being lesser-known assets.”
He candidly critiqued the remaining “10,000 or 15,000” projects as lacking fundamentals and relying on sentiment shifts for profit. “This sector is uniquely sentiment-dependent, with little focus on fundamentals. Many of these ventures will not survive, akin to venture capital investments that often fail.”
Addressing Enforcement and Academic Expectations
Gensler also addressed numerous “small pump and dump schemes,” referencing notable enforcement cases. He remarked, “We’ve witnessed notorious incidents where significant investor losses occurred, leading to high-profile incarcerations like those of Sam Bankman-Fried and others.”
In discussing the transition from academia, where he studied digital assets at MIT, to his regulatory role at the SEC, Gensler highlighted the distinction between academic exploration and regulatory enforcement. “As an academic, you can explore and analyze. However, in this position, building on my predecessor’s work, the field presents significant noncompliance with securities laws.”
At the time of writing, Bitcoin was valued at $93,253.
