SEC Chairman Gary Gensler: Bitcoin competes with the US banking system


  • Bitcoin is an “off-grid” alternative to the traditional financial system, said SEC Chairman Gary Gensler.
  • Gensler joined former SEC Chairman Jay Clayton on Wednesday to discuss Bitcoin, cryptocurrency and ETFs.
  • Issuers should “step into investor protection” to launch a US spot BTC ETF, Gensler said.

Bitcoin is a competitor to the U.S. banking system and its global consensus, Securities and Exchange Commission (SEC) Chairman Gary Gensler said on Wednesday.

“We overlaid our digital currency system around 40 years ago with money laundering and various sanctions and regimes around the world; we layered that on top of 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 that there is some competition that you and I do not support, but that tries to undermine this global consensus. “

Gensler’s remarks came at the DACOM 2021 Summit, a compliance and market integrity event that aired live on Wednesday. The SEC chairman joined Jay Clayton, who was in Gensler’s place at the head of the commission a few years ago, for a conversation on 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. Although Gensler does not vouch for either, he acknowledged their differences, emphasizing the security nature of many projects.

“This was largely about raising funds for entrepreneurs and as such meets the proven definition of an investment contract and therefore falls under securities laws,” Gensler said, making reference to the many tokens created and exchanged around the world outside of one’s country. regulatory scope.

Gensler has repeatedly said how he views the cryptocurrency industry as a ‘Wild West’. He urged the “guardians” of the many existing cryptocurrency projects to “find a way to register and come under investor protection.” Such projects, “whether it is a trading platform or a token”, he added, “are not going to develop well outside the principles of public policy”.

Speaking of digital assets, Gensler explained how, in his opinion, such developments already exist and do not require decentralization to function. 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 state-owned enterprises, are digital,” he said. “You buy and sell digital stocks, you buy and sell digital treasury bills; there is no more physical cash debt. I tend to call these digital assets.

However, Gensler did not outright take away the right to exist other digital assets. Ultimately, he said, investors should decide what is worth investing their money in. Nevertheless, it requires clear and direct information on the objectives of each project with their offers.

“At the heart of our market in the securities markets is: Investors decide what risks they want to take. But the people who raise the funds, the issuers, should share full and fair disclosure, ”he said, adding that if the value proposition is“ for the market to decide ”, it must be“ within the framework of the public policies “.

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 the regulatory umbrella of the SEC, 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 stemming from stablecoins, or by the investing public being hurt by fraudsters or bona fide actors making the promotion and fundraising, “said the chairman of the commission. “And the investing public has not, in hindsight, obtained enough information.”

“The innovations around DeFi could be real, but they will not persist if they remain outside the framework of public policies,” he added.

On stablecoins, Gensler likened them to “poker chips in casinos”, noting how much of the movement in this industry has been within trading platforms.

“They were originally proposed to make trading platforms more efficient, but it has also enabled people around the world to avoid money laundering and tax compliance in jurisdictions,” he said.

The SEC chairman also said his commission is working with sister agencies such as the Commodity Futures Trading Commission (CFTC) to determine how the various tokens should be treated by the US markets and its regulator.

“We are working together to fix this problem,” Gensler said. “But at the moment, the public is not protected as it could be and as I think it should be in this space. Technologies do not persist for long outside the norms of public policy; people are hurt, confidence is diminished. It is far better to integrate it into 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 SEC’s double standards for these products, Gensler declined to comment, saying he could not discuss the issues the commission is currently assessing. But he has shed light on what issuers need to do for a spot bitcoin ETF to be approved in the United States, although he said they were already aware of the SEC requirements.

“These platforms need to come in, register, fall under the investor protection mandate, ensure proper anti-manipulation and transparency, and deal with custody issues,” Gensler said.

On November 29, asset manager Grayscale Investments sent a letter to the SEC outlining the differences in the agency’s rejection of cash ETFs and acceptance of derivative-based offers.

“The Commission has no basis for asserting that investing in the derivatives market for an asset is acceptable to investors while investing in the asset itself is not,” the letter said.

The SEC rejected VanEck’s spot bitcoin ETF proposal earlier this month, and there are a few more deadlines on its schedule. The committee has nearly ten files lined up on its desk, awaiting approval.

Locate the Bitcoin ETF applications on the SEC desktop. Source: Arcane research.


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