SEC Chairman: Bitcoin and Cryptocurrencies Not Sure They Are "Currencies"

On the same day he was criticized by a commissioner, the SEC chairman faced a series of “tricky” questions from New York University Law School students about regulating the cryptocurrency industry.

Cryptocurrencies Should Be Viewed as Stores of Value Rather Than Currencies

SEC Chairman Gary Gensler said that the likelihood of Bitcoin (BTC) or other cryptocurrencies being widely used as a means of payment is very low. Instead, he thinks they should be viewed as a “store of value” rather than a currency.

At an event at New York University (NYU) Law School, Gensler answered a question about the value of cryptocurrencies when they were created to be free from government control. He said the SEC is “unbiased” and that the investing public will decide whether there is any real value in each cryptocurrency through the disclosure of information.

Gensler explained:

“Currency and financial systems have existed since ancient times, since Plato and Aristotle, spanning 3,000 years of history. Hundreds of large countries, thousands of peoples often have only one official currency for each economy. Even the use of a dual currency system (bimetallism) is not common.”

Gensler cited “Gresham’s Law” – a 19th-century monetary principle that states “bad money drives good money out of circulation,” implying that countries often want only one currency. A single currency serves as a store of value, a medium of exchange, and a unit of account – all of which have economic advantages due to the network of use.

Ultimately, he concluded that the likelihood of cryptocurrencies becoming real money is very low. To prove its worth, crypto needs to rely on disclosure and how it is used, just like stock options on exchanges.

In a discussion with NYU Professor Robert Jackson, Gary Gensler defended the commission’s stance on taking a hard line against crypto companies. According to the SEC Chairman, oversight is needed to ensure that the law is followed, especially in the financial sector, where people tend to overstep their bounds. Legal action is needed to “bring people back” to the law.

Gensler once again mentioned the issue of fraud in the crypto sector, specifically mentioning the notorious crypto figures who are in jail or awaiting extradition in 2024.

Therefore, the SEC Chairman believes that there is no need for a new legal framework beyond the existing regulation from the 1940 Supreme Court decision: the Howey Test.

In closing, Gensler declined to comment on how the upcoming presidential election might affect the SEC or whether he would resign if former President Trump were re-elected.

At the Bitcoin 2024 conference in July, Trump said he would fire Gensler if he won a second term. According to Politico, Dan Gallagher, Robinhood's chief legal officer, is a leading candidate to become SEC chairman if Trump wins the November election.

Former SEC Commissioner Michael Piwowar said that if there is a new SEC chairman, he could review existing regulations, including those affecting the cryptocurrency industry, and decide whether to continue, but would need the approval of the other commissioners.

SEC's crypto regulatory approach is a 'disaster'

The US Securities and Exchange Commission has been tough on the crypto industry for a long time, and one of its commissioners has been quick to criticize that it is hurting the entire industry.

SEC Commissioner Mark Uyeda (R-CA) told Fox Business' "Mornings with Maria":

"I think our policy and approach over the last few years has been a disaster for the entire industry. We've been implementing policy through enforcement without providing any specific guidance. As a result, the courts have had to intervene, and the rulings from different courts have been inconsistent."

Uyeda highlighted the frustration that the SEC has not provided clear guidance on what can and cannot be done, as well as how to register and regulate digital asset brokerages and exchanges. According to the commissioner, no discussion can begin without clearly defining the boundaries between assets that are within and outside the scope of securities law.

This statement was made a day after the SEC sent a warning to Well Notices and was countersued by Crypto.com. The trading platform claimed that the SEC had exceeded its authority and objected to the securities argument. Previously, the SEC continuously created a long-standing legal battle with giants Coinbase, Binance, Kraken, Ripple ...

The SEC Chairman has consistently argued that most cryptocurrencies should be classified as securities and has called on crypto platforms to register with the SEC. Crypto companies, on the other hand, have objected, arguing that the current regulatory framework is not appropriate for digital assets.

However, this is not the first time the SEC Chairman has been criticized for his overly strict and somewhat extreme stance. Republican Congressman Tom Emmer once called Gensler the most destructive and lawless SEC Chairman in the agency's 90-year history. Some US lawmakers have even called for SEC reform and Gensler's removal from the position of chairman.

In the latest development, the US Securities and Exchange Commission has filed a lawsuit against Cumberland DRW LLC, a well-known market maker in the cryptocurrency industry, for allegedly mediating $2 billion in crypto transactions that were deemed securities.