Outgoing SEC Chair Gary Gensler Lashes Out At Crypto Industry

The head of the US financial regulator has used the final weeks of his tenure to issue a stark warning about the current cryptocurrency industry.

In an 10 minute interview with Bloomberg Television (available on YouTube), the Securities and Exchange Commission (SEC) chair Gary Gensler said his time in charge of the SEC had been a privilege overseeing the $120 trillion capital market in the US, which “touches everything in our economy.”

But when Gary Gensler was asked 3 minutes into the interview about his views on crypto (Gensler had started his tenure calling crypto the ‘wild west’), he was asked if the crypto sector was now less of a wild west as he leaves office.

Bad actors

Gensler pointed out the crypto was less than 1 percent of the financial markets, and pointed out that his predecessor had brought in 80 enforcement actions in this sector, while the SEC under Gensler has brought in about 100 enforcement actions for the crypto sector.

And Gensler revealed that the crypto sector takes about 5 percent of the SEC’s law enforcement time (95 percent is focused on scammers, fraud etc).

“But in this (crypto) field, it is rife with bad actors,” the SEC’s Gensler stated. “And let me just split the field for a minute. The public knows a lot about Bitcoin which is depending upon its market value on any given day, is two thirds to 80 percent of market value of crypto.”

“And then there is everything else. Or some people say Bitcoin and Etherium and everything else,” said Gensler. “These 10 or 15,000 projects they’re raising money from the public, and the public’s investing, or the public is investing hoping for a better future.”

“I’ve been around finance for over four decades and everything in the markets trade on a mixture of fundamentals and sentiment. At any given time, I’ve never seen a field that’s so much wrapped up in sentiment and not so much about fundamentals,” said Gensler.

“And these 10,000 to 15,00 projects, many of them will not survive,” cautioned Gensler. “They’re like venture capital investments. They’re not going to survive. But there are also a fair number of small pump and dump schemes and other things in the US.”

Crypto trials

“And of course, we’ve lived through a few years where, you know, they became notorious, but they’re in jail,” said Gensler, before noting FTX founder Sam Bankman-Fried, Binance founder Changpeng Zhao, and Terra ecosystem creator Do Kwon.

“The Sam Bankman-Frieds and Do Kwons where tens of billions of dollars were lost by investors,” he said.

Gensler was then asked by the host of Bloomberg Television about those cases, and whether those high profile cases will bring about a change in behaviour in the sector.

“It’s a field that built up around non-compliance,” Gensler replied. “And I’m proud of what we’ve done and building on the work of previous SEC administrations.

“I think there’s still work to be done, particularly saying about these 10 or 15,000 alternative coins that they’re and the intermediaries themselves,” Gensler said. “I think there is still work to be done and I think the public is probably aware of this, and less than 10 percent of the public invests in this field.”

“I think there is Federal Reserve. And even we did a survey here in these public figures, it’s somewhere between seven and 9 percent of the public should be aware,” warned Gensler. “These are highly speculative, volatile investments and they’re not getting the full and fair disclosure that is appropriate.”

“What we are talking about here at the SEC for nine years is letting the public decide what they want to invest in,” Gensler said. “And secondly, that the intermediaries, the brokers, the stock exchanges, the advisors, are giving that advice and doing what they’re doing without fraud and manipulation and so forth.”

Gensler’s replacement

Gary Gensler is set to leave office on 20 January, the same day that Donald Trump will begin his second presidential term.

Trump had previously promised to fire Gensler, who has also been criticised by the head of Coinbase as well as Binance, for leading a drive to more closely regulate crypto firms under existing securities regulations.

Trump’s pick for Gensler’s replacement is the former SEC commissioner Paul Atkins, who is widely expected to reverse the current SEC’s crypto-hostile stance.

Atkins, the CEO of Patomak Partners, had served as an SEC commissioner for six years following his appointment by President George W. Bush.