In a recent interview on CNBC's "Squawk on the Street," Securities and Exchange Commission (SEC) Chair Gary Gensler expressed doubts about the need for more digital currency, suggesting that existing forms of digital currency, such as the U.S. dollar, euro, and yen, already fulfill that role. Gensler's comments come as the SEC has taken decisive action against leading cryptocurrency exchanges, including Coinbase and Binance.
The SEC filed a lawsuit against Coinbase, alleging that the platform operated as both an unregistered broker and an exchange. Similarly, the commission went after Binance, accusing the world's largest crypto exchange of commingling user funds and funneling them to a European company controlled by its founder, Changpeng Zhao.
Gensler emphasized that these crypto platforms, which refer to themselves as exchanges, perform a range of functions that are typically separate in traditional finance. Drawing a comparison, he highlighted that the New York Stock Exchange doesn't engage in hedge fund activities while making markets.
Following Gensler's remarks, cryptocurrency prices remained relatively stable, although shares of Coinbase saw a 17% decline. Gensler acknowledged that it takes time to handle cases according to the appropriate protocols but assured investors that the SEC is vigilant about the risks associated with the digital currency world. He underscored the importance of compliance, stating that crypto platforms and intermediaries need to adhere to U.S. securities laws.
During the CNBC interview, Gensler discussed the recent lawsuits against Binance and Coinbase. He argued that these platforms evade American regulation and accused them of lacking controls, engaging in deception, and being built on non-compliance with U.S. securities laws. Gensler specifically mentioned the allegation that Binance commingled customer funds with those of its trading firm, Merit Peak Limited, as an example of why crypto exchanges require increased oversight.
Gensler also addressed the value of various crypto tokens, acknowledging ongoing debates about their use cases. When questioned about the coins listed as securities in the Binance complaint, he reiterated his stance that additional digital currencies are unnecessary, as existing fiat currencies already serve that purpose.
Despite his skepticism about the coexistence of crypto and fiat currencies, Gensler emphasized that if there is genuine value in crypto tokens, compliance will foster trust and potentially lead to changes in the business model of crypto exchanges. He defended the SEC's actions as "pro innovation," asserting that trust is vital for the proper functioning of capital markets.
Gensler refrained from discussing specific communications between the SEC and the companies involved but affirmed the agency's readiness to bring more crypto exchanges into compliance. In court, the SEC aims to demonstrate that at least one crypto token qualifies as a security and should be subject to proper registration.
Chair Gensler's recent remarks reflect the SEC's heightened enforcement efforts against crypto companies. While he did not provide a definitive answer regarding ether's classification as a security or commodity during his congressional testimony in April, Gensler's skepticism about the need for additional digital currencies remains steadfast.
