SILVER SPRING, Md. (AP) – The chairman of the Securities and Exchange Commission said investors need more protection in the cryptocurrency market, which he believes is “fraught with scams, fraud and abuse.”
Gary Gensler, who was named to chair the Securities Markets Regulation Board by President Joe Biden, listed several areas where crypto needed to be governed or regulated, particularly in relation to money laundering, sanctions, tax collection and ransomware extortion.
“At the moment we just don’t have enough investor protection in cryptocurrencies,” Gensler said in a comment on the Aspen Institute’s security forum. “To be honest, it’s more like the Wild West at the moment.”
Digital currencies like Bitcoin have so far been largely left unregulated by major governments. In June, China ordered the closure of its cryptocurrency mining operations and banks began refusing to help customers with Bitcoin transactions. Although the SEC has filed and won dozens of cases against fraudsters, Gensler said the agency needs more authority – and more resources – from Congress to regulate the crypto markets.
Gensler was seen as receptive to cryptocurrency and other emerging financial technologies after serving as a professor at MIT, where he focused his research and teaching on public policy, as well as digital currencies and blockchain, the global running ledgers of digital currency transactions.
Beyond the current problems in the crypto space, Gensler called the innovation “real” and said it was “and could continue to be a catalyst for change in finance and money.”
Gensler was with Goldman Sachs for 20 years and surprised many with his harshness as a regulator on the Commodity Futures Trading Commission during the Obama administration.
Gensler opened his remarks by saying that he was not speaking on behalf of the SEC or its employees, but that he personally believed that the regulation of cryptocurrencies would fall within the remit of his agency.
Gensler said that unlike public fiat money such as the dollar or the euro, crypto assets do not fulfill all three functions of money: store of value, unit of account and medium of exchange. He said cryptocurrencies primarily provide digital, scarce vehicles for speculative investment – “highly speculative stores of value,” he said.
When Congress defined what a security was in the 1930s, Gensler said, one of those definitions was an investment contract – when “a person invests their money in a joint venture and profits solely from the efforts of the promoter or a third party.”
This definition, which Gensler said should apply to cryptocurrency, has been tested and confirmed by the Supreme Court. Gensler noted that his predecessor at the SEC, Jay Clayton, testified in 2018 that he held ICOs, or Initial Coin Offerings, for securities and that “we have jurisdiction and our federal securities laws apply.”
Gensler said many crypto tokens are unregistered securities and do not come with market oversight or adequate disclosures to educate investors. That leaves prices open to manipulation and leaves investors unprotected, he said.
“These products are subject to securities laws and must function within our securities regime,” said Gensler. “If we don’t address these issues, I fear that many people will be injured.”
The combined market capitalization of all cryptocurrencies is currently more than $ 1.5 trillion.
Tuesday’s event marked the first time the nonprofit Aspen Institute included a discussion of cryptocurrency in the national security forum.
