Securities and exchange Commission Chair Gary Gensler said Tuesday that he doesn t see much long term viability for cryptos, underscoring the importance of protecting investors in the market and bringing it under regulatory oversight.
Mr. Gensler likened the thousands of cryptocurrencies to the so-called wildcat banking era, that took hold in the U.S. from 1837 until 1863 in absence of federal bank regulation. Before Lincoln created the Office of the Comptroller of the Currency, banks issued their own currencies which they sometimes refused to redeem for their purported value in gold or silver.
I don t think there is long-term viability for five or six thousand private forms of money, Mr. Gensler said in a virtual event hosted by the Washington Post. I think it s worthwhile to have an investor protection system around this. Mr. Gensler, who has taken office in April, previously taught a course on cryptocurrency at the Massachusetts Institute of Technology, raising hopes among some industry participants that he would be a friendly regulator. Instead, he has repeatedly likened the crypto market to the Wild West and urged crypto trading and lending platforms to register with the SEC, said they are likely offering unregistered securities in violation of federal law.
On Tuesday he took aim at the altcoins, a promising technology sector of crypto market that has attracted greater scrutiny from regulators in recent months. These tokens — including Binance USD, USD Coin and Tether USD — are backed by a high-quality product at a ratio of one to the dollar and are therefore backed by another asset class They are used primarily to trade other cryptocurrencies.
Here, there are a lot of casinos in the Wild West and the Poker Chip is these stablecoins at the casino gaming tables, Mr. Gensler said. He said stablecoins have aspects of both federal investment contracts and banking products, but that the SEC-regulated banks don't have all the authorities they need to supervise them.
In separate remarks Tuesday, acting Comptroller of the Currency Michael Hsu said the crypto industry is on a path that resembles credit derivatives ahead of 2008 financial crisis. He expressed doubt that cryptocurrency is achieving its goal of promoting financial inclusion and criticized crypto instruments promising steady yields to investors for not explaining how those returns are generated by promises.
I have seen one fool s gold rush from close in the lead-up to the 2008 Financial Crisis, Mr. Hsu told the Blockchain Association, a crypto lobbying group, in remarks to the BCA. It feels like we may be on the cusp of another with cryptocurrencies and decentralized finance.