In an interview with David Gura on Bloomberg Markets on Wednesday, outgoing Securities and Exchange Commission (SEC) Chair Gary Gensler reviewed his tenure and the role of crypto throughout the US capital markets. Gensler, who has lower than two weeks left in his term, remained steadfast on his stance toward the digital asset space, calling it “rife with bad actors” and stressing that “lots of them won’t survive.”
Crypto Is Still The ‘Wild West’
Gensler began by addressing the criticism he has faced during his tenure. “It’s an ideal privilege to be in a task like this,” he said, highlighting that he’s the thirty third SEC chair and credits President Joe Biden for the appointment. “You walk into this central square and also you debate these essential things for 330 million Americans,” he added.
Asked whether the extent of scrutiny he has experienced is different in comparison with his time as head of the Commodity Futures Trading Commission (CFTC) through the global financial crisis, Gensler acknowledged, “It does change.” Nonetheless, he maintained that the commission’s chief focus stays “searching for on a regular basis Americans, attempting to lower the price of the markets […] It doesn’t surprise me that there’s some in the midst of the market who[…] may need thoughts on that and object.”
Turning to crypto, Gensler echoed a theme he has repeatedly underscored since taking office: The digital asset industry accounts for lower than 1% of the US capital markets—he placed your entire capital market at roughly “$120 trillion”—yet it has demanded significant SEC attention.
He stood by his earlier “Wild West” depiction of crypto, mentioning, “It’s a field that built up around non-compliance.” He also invoked the enforcement actions pursued under each his tenure and that of his predecessor, Jay Clayton. “Jay brought 80 enforcement actions on this area. We’ve brought in about 100 in our 4 years,” Gensler said. “It’s possibly about 5% of what we do in our law enforcement,” he noted, explaining that the remaining 95% targets traditional scammers and fraudsters.
Highlighting how sentiment-based and volatile the space is, Gensler divided the digital asset world into two parts: “This field, it’s rife with bad actors. Let me just split the sphere into two only for a minute. The general public knows loads about Bitcoin, which depending upon its market value on any given day, is 2 thirds to 80% of the market value of crypto. After which there’s all the things else. Or some people say Bitcoin and Ethereum and all the things else.”
He was blunt in his assessment that the opposite “10,000 or 15,000” that are projects with no fundamentals which only benefit from sentiment shifts. “I’ve never seen a field that’s a lot wrapped up in sentiment and never a lot about fundamentals. And these 10,000 to fifteen,000 projects, lots of them won’t survive. They’re like enterprise capital investments. They’re not going to survive.”
Gensler also highlighted that there’s an enormous variety of “small pump and dump schemes”. Specifically referencing high-profile enforcement actions, Gensler stated: “We’ve lived through a couple of years where, you realize, they became notorious, but they’re in jail. The Sam Bankman-Fried, the CZ’s and Do Kwon’s where tens of billions of dollars were lost by investors.”
Gensler was also asked in regards to the shift from his time at MIT—where he studied digital assets—to his enforcement-heavy approach on the SEC. He addressed the general public perception that he could be a “champion” of crypto by noting the difference between academic inquiry and regulatory responsibilities. “If you’re in academia […] you possibly can study something and observe it […] But then once you’re on this job […] constructing upon my predecessor[…] It’s a field rife with challenges and noncompliance with the securities laws.”
At press time, Bitcoin traded at $93,253.
Featured image from YouTube, chart from TradingView.com