SEC Chairman Doesn’t See Long Term Viability for Cryptocurrencies

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In Brief
  • The regulator compared the thousands of cryptos to the wildcat banking era.

  • Gensler says meanwhile it's good to have investor-protected regulations in place.

  • The remarks come as U.S. regulators plan for a crypto crackdown.

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The Chairman of the U.S. Securities and Exchange Commission (SEC) says he doesn’t see cryptocurrencies lasting long. 

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At a virtual event hosted by the Washington Post, SEC Chairman Gary Gensler compared cryptocurrencies to past financial movements. He said the thousands of digital currencies are like the so-called wildcat banking era of 1837-63 in the  U.S.. During this time in history there was no federal bank regulation and banks sometimes issued their own currencies. 

Gensler said because of the array of currencies he doesn’t see long term sustainability for cryptocurrencies. He also highlighted the importance of investor protection and regulatory oversight. 

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“I don’t think there’s long-term viability for five or six thousand private forms of money,” Gensler commented. “So in the meantime I think it’s worthwhile to have an investor-protection regime placed around this.”

In addition, the Acting Comptroller of the Currency Michael Hsu likened the crypto industry to credit derivatives pre-2008 financial crisis. “I have seen one fool’s gold rush from up close in the lead-up to the 2008 financial crisis,” Hsu remarked to the lobbying group  Blockchain Association. “It feels like we may be on the cusp of another with cryptocurrencies and decentralized finance.”

Gensler on Crypto

Prior to Gensler’s take over as SEC Chairman, the crypto industry had high hopes for the regulator. Gensler has a background as a MIT blockchain professor. Many believed his knowledge and insight of the technological backbone of the crypto space would be a positive development. 

However, since the start of his reign in the SEC Gensler’s stance has become more hostile towards the industry. This past August, Gensler’s remarks hinted at his ideas of a more comprehensive crypto oversight regime

Shortly after that, the SEC Chairman called on Senator Elizabeth Warren for regulatory support. Warren’s stance on cryptocurrencies is anything but friendly towards the industry. Just before Gensler’s request, the Senator called for more policing of cryptocurrencies. 

Over the last month, Gensler remarked that crypto platforms needed federal regulations for long term survival. Shortly after, he detailed a roadmap for regulations toward the industry. 

All the while, the SEC has various lawsuits and potential probes in crypto-related companies. Most famous is the ongoing Ripple case, in which the company denies any wrongdoing. However the SEC recently launched a probe into UniSwap, the world’s largest decentralized exchange and threatened Coinbase with a lawsuit. 

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Savannah Fortis is a multimedia journalist covering stories at the intersection culture, international relations, and technology. Through her travels she was introduced to the crypto-community back in 2017 and has been interacting with the space since.

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