SEC Chair Gary Gensler on Crypto: ‘It’s Unlikely This Stuff is Gonna Be a Currency’

At a talk held at New York University School of Law in Manhattan on Wednesday, Gensler addressed a query regarding the worth of cryptocurrencies – initially designed as independent from governments – should they be fully integrated under regulatory oversight.

According to Gensler, the agency maintains an impartial stance, and it’s up to the general public to determine whether a particular cryptocurrency has value based on the information provided – the value assessment will be made through disclosures.

He mentioned that he had previously taught this topic at MIT and similar institutions, so he was confident in saying the following: These discussions can be traced all the way back to philosophers like Plato and Aristotle, spanning over three thousand years. This rich history includes numerous influential nations and countless nation-states. Typically, a single currency is used within each geographical economic region. Moreover, even the use of bimetallism, which is the practice of using two metals as money, is rarely observed.

Gensler referred to an old monetary principle, Gresham’s Law, which was established in the 19th century, stating that inferior money tends to push superior money out of circulation. He further explained that countries generally aim for a sole currency as their preference.

As an analyst, I can express Gensler’s statement like this: “I believe one should consider a single unit of currency due to its role as a storehouse of value, a means for transactions, and a standard for accounting. These properties stem from strong network economics. However, it seems unlikely that these digital assets will function as a currency in the traditional sense. Instead, they’ll need to demonstrate their worth through transparency, practical application, much like how you evaluate among thousands of securities listed on a stock exchange.

Fraudsters, grifters and scams

In a comprehensive discussion with NYU Law Professor Robert Jackson, Gensler upheld his regulatory body’s reputation for taking robust action against cryptocurrency firms.

As a crypto investor, I ponder over the question: If there are no regulators keeping watch, will rules still be followed? It’s fascinating how human nature often leads us to tread close to the boundaries in finance. Sometimes, it takes regulatory action to remind us where the correct side of the line lies.

He stated that the cryptocurrency sector was filled with numerous individuals engaging in fraudulent activities, con artists, and scams. Furthermore, he noted that many of the key figures in this domain during 2024 found themselves either imprisoned or on their way to be extradited at that time.

Gensler stated that he believes existing regulations, particularly the Howey Test as established by the Supreme Court in 1940, are sufficient without requiring any further regulatory framework.

As an analyst, I would rephrase the statement as follows: “If you’re questioning whether a given situation qualifies as an investment contract, consider this: Who is the party entering into the agreement with your law firm? It’s always a central enterprise, someone who is signing that agreement. Now, imagine someone knocking on the door of a broker-dealer and asking them to facilitate trading in a specific asset. It seems illogical that there isn’t a common enterprise involved in most cases,” Gensler explained.

Gensler chose not to discuss the possible influence of the upcoming presidential election on the SEC, nor did he reveal his intentions regarding resignation if former President Trump were to be re-elected.