It has been widely noted that the new Chairman of the Securities and Exchange Commission in the U.S., Gary Gensler, is much more tech savvy that his predecessor. Gensler has taught at MIT on topics such as blockchain technology, digital currencies, financial technology, and public policy. Last week, Gensler addressed his views on the regulation of cryptoassets in two public appearances.
On May 6th, Gensler testified before Congress for the first time as Chairman. Although the subject of the hearing was the recent Gamestop incident, he took several crypto-related questions while testifying before the House Financial Services Committee. In one response, Gensler said the “cryptoasset market is one that could benefit from greater investor protection.” However, he continued: “within the SEC’s current authorities, our authority is around securities and around products, asset managers, and products that might invest in these cryptocurrencies…I do think that working with Congress, and I think it’s only Congress that could really address it, it would be good to consider…whether to bring greater investor protection to the crypto exchanges.” When asked about his views on the SEC’s approach to digital asset regulation, Gensler vaguely replied: “I think that there are things that we can do better and get done at the (SEC), and we have authorities, but I also look forward to working with Congress if it’s the desire of Congress to try to fill some gaps…particularly if one trades Bitcoin in America today, there’s not an investor protection regime that really protects as I think would be appropriate around these exchanges.”
In a May 7th interview with CNBC, Gensler reiterated and expanded on some of these points. In response to a question about how crypto should be regulated, Gensler said: “I think to the extent something is a security, the SEC has a lot of authority and a lot of crypto tokens…are indeed securities.” However, he then noted that “we need greater investor protection” and that there is “a gap in our system right now.” When asked who should address this “gap,” Gensler replied: “…as it relates to Bitcoin, while our sister agency, the (CFTC) has limited anti-fraud and anti-manipulation authority, there’s no federal authority to actually bring a regime to the crypto exchanges…that’s really something that we’ll be working with Congress and if they see fit to try to bring some protection.” Lastly, when asked about the impact of social media on investor protection, Gensler mentioned that while the SEC has “a lot of authorities” in the securities field related to preventing misleading speech and manipulation, in “a number of these crypto fields, not so clear, if it’s Bitcoin for instance, which has been deemed not to be a security, but I do think that we’re going to be freshening up our rules and really hearing from the public.”
While Gensler’s comments demonstrated his belief that cryptoassets should be more highly regulated, they also seemed to suggest that he views the SEC’s role in potentially implementing some of those changes as largely deferential vis-à-vis Congress.