New SEC Chairman Gary Gensler has a track record of bold and high-impact measures. With experience as a former Wall Street investment banker and as CFTC Chairman, he led regulatory adaptations following the 2008 financial crisis and brings an unprecedented understanding of regulatory and compliance challenges.
From authorities facing a steep learning curve of innovation and technology to established financial institutions trying to adapt their processes to remain competitive, the worlds of finance, trading, and even currencies are rapidly evolving. What’s more, Gensler has been both interested in and vocal about the potential of cryptocurrencies and blockchain technologies. As an MIT professor, he even taught a course titled “Blockchain and Money”.
Instead of speculating about what his priorities will be at the SEC, or what his standpoint will be about crypto regulation in the coming months and years, we collected some of his most incisive and relevant comments from recent months to help give us an idea ofhis views on market surveillance and the main challenges around crypto regulation:
1. To Enable its potential, crypto needs effective risk monitoring.
“Crypto activities are more complex, inherently harder to monitor and less traceable than straightforward money transfers… illicit activity is hard to track, billions of dollars have been lost to hacks, and manipulative behavior is unchecked.” Source: Congress.gov
2. Crypto markets can only be effectively regulated via application of commodities and securities law on a federal level
“The current patchwork approach to addressing these issues – to guard against illicit activities, protect investors & their funds, and promote market integrity – would be better accomplished through application of commodities and securities laws.” Source: Harvard.edu
3. You can’t ignore the impending growth and evolution of crypto, and the right resources and infrastructure need to be deployed.
“It also is critical that the CFTC, SEC and other agencies have sufficient budgetary resources to adequately oversee crypto markets, especially as these markets have continued to grow.” Source: Congress.gov
4. Market Integrity and manipulative behavior is a major problem that needs to be solved.
“The volumes, millions of customers, repeated hacks and ample potential for manipulative behavior, suggest that oversight is worthy by securities, commodities and derivatives regulators around the globe. To date, however, this trading activity has largely taken place outside of investor protection and market integrity regimes.” Source: Congress.gov
5. Protecting market integrity is paramount to bolster confidence in any type of market.
“Such core principles of investor protection and market integrity are embodied in U.S. securities and commodities laws regardless of the form of investment. Such common-sense rules of the road bolster confidence in markets and enhances our economy.” Source: Congress.gov
6. Crypto needs their own bespoke rules and regulations to be traded as commodities.
“Congress may wish to consider if it would be more appropriate to provide the CFTC – or another agency - with general authorities to write rules for crypto cash commodities markets, including possibly requiring registration for trading on crypto exchanges solely dealing in cryptocurrencies, aka crypto cash commodities.” Source: Govinfo.gov
7. Transparency and well-regulated markets benefit everyone.
"I say that transparent markets and well-regulated markets benefit the American public, benefit American businesses, and ultimately help promote jobs," Gensler said in one interview. "So I say I think what we're doing here actually helps business and helps America."
8. Cryptocurrencies as a huge catalyst for positive change.
“I remain intrigued by Satoshi’s innovation’s potential to spur change—either directly or indirectly as a catalyst. The potential to lower verification and networking costs is worth pursuing, particularly to lower economic rents and data privacy costs, and promote economic inclusion... cryptocurrencies and blockchain have already prompted real change, and can continue to do so.” Source: Coindesk
9. Policing against fraudulent activities and market manipulation will be at the top of the agenda, just as it was when Gensler led the market surveillance efforts post 2008 crisis as the chairman of the CFTC.
“Markets work best when there's a cop on the beat." Source: NPR