SEC chair Gary Gensler: Cryptocurrency sector is “rife with fraud, scams, abuse”

By: Daniela Kirova
Daniela Kirova
Daniela was born in Bulgaria, grew up in Chicago, and then moved to Michigan to attend the University of… read more.
on Aug 4, 2021
  • Securities laws are not universally applicable, platforms "standing astride" regulation
  • Gensler is 'big fan' of innovation, but not at the expense of rules
  • SEC wants to offer some 'basic protection against fraud and speculation'

Chairman of the Securities and Exchange Commission Gary Gensler joined CNBC’s “Squawk Box” to discuss how he believed crypto should be regulated, the rise of retail investing, and more. With reference to a previous statement of his that the crypto sector was “rife with fraud, scams, and abuse,” he introduced the topic:  

“We’re an investor protection agency and right now this asset class – Bitcoin (BTC/USD) and hundreds of other coins – is a speculative asset class. If people want to take risks, that’s all right (but) we want to provide some basic protection against fraud and speculation. The trading platforms they (investors) are on are not currently under a regulatory regime that protects them like they’re on the NYSE. I think those are gaps. I don’t think that’s good for investors or the technology.”

Securities laws not universally applicable

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Asked whether laws needed to change and whether SEC had the authority it needed, Gary Gensler replied that many of the coins themselves, the way they are issued, etc. came under securities laws. However, some trading and lending platforms are “standing astride regulation”. He accused the platforms of lawyering up rather than engaging in honest discussion with the watchdog, which is having an adverse effect on the market.

The key question was where SEC found itself on the continuum between innovation and regulation. In asking it, the host invoked the SEC chair’s expertise on the topic of crypto, in which he taught courses at MIT for three years. Gary Gensler responded by saying he was a big fan of innovation and gave examples of how it gave people access to better medicine and better jobs. He added:

“Innovation must come within public policy frameworks. Without rules of the road, there would be no confidence and trust (in the systems).”   

In a Tweet shortly after Gensler’s CNBC appearance, CFTC Commissioner Brian Quintenz said the SEC has “no authority over pure commodities or their trading venues, whether those commodities are wheat, gold, oil….or #crypto assets.”

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