SEC Chair Gary Gensler speaks to Yahoo Finance on Stablecoins, ETF rollout, DeFi lending and more

Yahoo Finance | Oct 25, 2021

In a wide-ranging interview with Yahoo Finance’s Brian Cheung, SEC Chair Gary Gensler discusses cryptocurrency regulation, the GameStop trading frenzy, and various conflicts tied to retail investing.

Video transcript between Gary Gensler, Chair of SEC and Brian Cheung with Yahoo Finance

BC: Gary Gensler is chair of the Securities and Exchange Commission, the government’s top financial markets watchdog. Gensler joined the SEC in April 2021, and is facing many regulatory puzzles from payment for order flow to ESG corporate disclosures to, of course, cryptocurrencies.

The former MIT professor and Baltimore, Maryland native is no stranger to the regulatory world. Having served as the head of the Commodity Futures Trading Commission under the Obama administration. He’s also an alumni of Goldman Sachs with a deep knowledge of Wall Street.

See:  GARY GENSLER: Brian, we really take a look at these when effective as you know last week. But we look at these is the Chicago Mercantile Exchange has Bitcoin futures, it’s been regulated by our sibling regulator, the Commodity Futures Trading Commission for four years. And then on top of that, there’s the regulatory regime, which we’ve had for nearly 80 years for investment funds and the like.

We’d already had some Bitcoin futures mutual funds. They didn’t get as much publicity. And these weren’t effective along with that. It’s really a matter of bringing as much of this space within the investor protection remit. And I think that that’s really the story here, is if projects, tokens come to us, work with us, and bring themselves inside the regulatory perimeter, investors will be better protected.

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BC: So on that point, I mean, just to kind of drill down. The Bitcoin spot ETF. You’ve expressed concern about what the underlying risk might be with Bitcoin, whether that’s anti-money laundering or other types of issues.

Do you feel like anything that you’ve seen, though, with the Bitcoin futures products last week are resolved? Are any of those concerns kind of alleviated given what we’ve seen, the response to those products be? And are you becoming more friendly towards the idea of a spot ETF because of what you saw last week or are you still trying to kind of form what your thoughts are on the underlying product first before you try to move forward on any sort of other product there?

GARY GENSLER: Brian, you can imagine I’m not going to speak to any individual filings that might be in front of us or prejudge anything. But I think that the concern for the investing public is the crypto asset space to plus 2 and 1/2 trillion dollars.

Most of it has not come within an investor protection remit. And thus, investors are protected the way they are, whether they go into the stock or bond markets that we’ve overseen for so long. Without that, I think that it’s really is, as I’ve said to others, a bit of the Wild West. And these markets largely around the globe, 24 hours a day, seven days a week don’t have the similar protections against fraud and manipulation and front-running and other abuses.

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BC: So let’s move on to stablecoins kind of sub corner in the crypto space. They’ve been eating a lot of lunch from the prime money market funds. And there’s been some media reporting that’s gotten a lot of attention about the transparency by which some of these stablecoins are detailing what’s actually underlying the reserves that back these assets. You’ve compared stablecoins to chips at a Casino. Do you think that stablecoin should be regulated as banks?

GARY GENSLER: Well, there’s about $130 billion stablecoins today. That’s up nearly tenfold in the last year. And they are intertwined inside of crypto exchanges, crypto lending platforms, so-called DeFi. And those poker chips, so to speak, are facilitating 80% of the volume. So there are only 5% of the crypto market.

But 80% of the volume in this token to token, crypto to crypto trading. And so I think there’s a lot of speculative activity. And again, it’s best to bring that inside regulatory investor protection remit. So I do think there’s work to be done here.

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