Gary Gensler said on Wednesday that Bitcoin was created “as a reaction” to the US monetary system and its global consensus.
- Bitcoin is an “off-grid” alternative to the traditional financial system, SEC Chairman Gary Gensler has said.
- Gensler joined former SEC Chairman Jay Clayton on Wednesday to talk bitcoin, cryptocurrency and ETFs.
- Issuers would have to “come within investor protection” to launch a spot BTC ETF in the U.S., Gensler said.
Bitcoin is a competitor to the US banking system and its global consensus, Securities and Exchange Commission (SEC) Chairman Gary Gensler said on Wednesday.
“We layered our digital currency system about 40 years ago with money laundering and various sanctions and regimes around the world; we overlaid that on a digital currency system called our banking system,” Gensler said. “In 2008, Satoshi Nakamoto wrote this article partly as a reaction, an off-grid type approach. It’s no surprise there’s some competition that you and I don’t support, but who are trying to undermine what global consensus.
Gensler’s remarks came during the DACOM Summit 2021, a compliance and market integrity event broadcast live on Wednesday. The SEC Chairman joined Jay Clayton, who replaced Gensler as head of the committee a few years ago, for a conversation about bitcoin, cryptocurrencies, digital assets, exchange-traded funds ( ETF) and decentralized finance.
Bitcoin, the dollar and digital assets
Throughout the conversation, the SEC Chairman continued to draw a line between Bitcoin and digital assets. While Gensler didn’t vouch for either, he did acknowledge their differences, pointing to the title-like nature of many projects.
“It was largely about raising money for entrepreneurs, and as such meets the tried and true definition of an investment contract and therefore falls under securities laws,” Gensler said, making refers to the many tokens created and traded around the world outside of its regulatory scope.
Gensler has repeatedly stated how he views the cryptocurrency industry as a “Wild West”. He urged the “custodians” of the many existing cryptocurrency projects to “find a path to register and enter the investor protection mandate.” Such projects, “whether it’s a trading platform or a token,” he added, “are not going to evolve well outside the principles of public policy.”
Speaking of digital assets, Gensler commented on how, in his view, such developments already exist and do not require decentralization to operate. The SEC Chairman also drew a parallel between the US dollar and the concept of digital currency, downplaying their differences.
“The US dollar, euro and yen, and most public companies, are digital,” he claimed. “You buy and sell digital stocks, you buy and sell digital treasuries; there is no longer any physical Treasury debt. I tend to call these digital assets.
However, Gensler did not outright remove the right to exist from other digital assets. Ultimately, he said, investors should decide what is worth investing their money in. Yet, it demands clear and direct information about the objectives of each project along with their bids.
“At the heart of our trading in the securities markets is: investors can decide what risks they want to take. But the people raising the funds, the issuers, should share full and fair disclosure,” he said, adding that while the value proposition is “for the market to decide,” it must be “within the frameworks of public policy “.
Gensler stressed the importance of “full and fair disclosure” from the perspective of “investor protection and fraud prevention.” If these digital assets do not fall under SEC regulation, he added, there could be financial instabilities in the future.
“We’re going to have a ‘spill in aisle 3’ and…it could be an event of financial instability, or from stablecoins, or from the investing public harmed by scammers or bonafide actors promoting and fundraising,” said the chairman of the commission. “And the investing public has not, in hindsight, gotten enough information.”
“The innovations around DeFi might be real, but they won’t persist if they stay outside public policy frameworks,” he added.
On stablecoins, Gensler likened them to “poker chips in casinos,” pointing out how the majority of movement in this sector has taken place inside trading platforms.
“They were initially put forward to make trading platforms more efficient, but it has also allowed people around the world to avoid money laundering and tax compliance across jurisdictions,” he said. .
The SEC Chairman also indicated that his commission is working with sister agencies such as the Commodity Futures Trading Commission (CFTC) to determine how different tokens should be treated by US markets and its regulator.
“We’re working together to sort this out,” Gensler said. “But at the moment the public is not protected as they could be and as I think they should be in this space. Technologies do not persist long outside the norms of public policy; people are hurt, confidence is diminished. It’s far better to embed it in policy frameworks, and that’s what we’re going to try to do at the SEC.
When will the SEC approve a Bitcoin Spot ETF?
Asked about bitcoin ETFs and the double standards applied by the SEC to these products, Gensler declined to comment, saying he could not discuss the issues the commission is currently evaluating. But he shed some light on what issuers need to do to get a spot bitcoin ETF approved in the US, though he said they already know what the SEC requirements are.
“These platforms must enter, register, fall under the investor protection mandate, ensure appropriate anti-manipulation and transparency, and address custody issues,” Gensler said.
On November 29, asset manager Grayscale Investments sent a letter to the SEC outlining discrepancies in the agency’s rejection of spot ETFs and acceptance of derivatives-based offers.
“The Commission has no basis for the position that investing in the derivatives market for an asset is acceptable to investors while investing in the asset itself is not,” the letter states.
The SEC had rejected VanEck’s spot bitcoin ETF proposal earlier that month, and a few more deadlines are coming up on its schedule. The commission has nearly ten filings lined up on its desk, awaiting approval.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.