Gary Gensler, President Biden’s pick to head the U.S. Securities and Exchange Commission, suggested Tuesday he would continue the agency’s crackdown on cryptocurrency to protect consumers from fraud and manipulation.
The SEC has intensified its scrutiny of digital assets since finding in 2017 that some tokens may be considered securities, making their issuance, sale, and trading subject to federal laws.
At his Senate confirmation hearing Tuesday, Gensler said bitcoin and other cryptocurrencies “have brought new thinking to financial planning and investor inclusion.” But as SEC chair, he would work with his fellow commissioners to “ensure investor protection.”
If something were a security, for instance, it comes under security regulation, under the SEC. The SEC must ensure that crypto markets “are free of fraud and manipulation,” Gensler told the Senate Banking Committee, noting that “some markets, usually operating overseas, have been rife with fraud.”
As Quartz reports, Gensler is “known in progressive circles as a tough financial sector reformer from his post-financial-crisis days as head of the Commodities Futures Trading Commission, but he is also hailed by the crypto crowd for his understanding of blockchain technologies, as an MIT economics professor who teaches about blockchain, digital currencies, and financial innovation.”
He has previously indicated that if a coin offering is meant to give investors an ownership stake, then token should be subject to the regulations of a security even if it doesn’t offer a dividend, or have the typical attributes of an equity or bond.
“The investing public is clearly hoping for possible appreciation,” Gensler told an MIT blockchain conference in 2018. “When you quack like the duck, when you swim like the duck, when you walk like the duck … I think the bird’s a duck.”
If confirmed, Gensler will inherit the high-profile case charging Ripple Labs with illegally raising more than $1.3 billion through sales of its XRP tokens. Ripple has called the case “an attack on the entire crypto industry and American innovation.” On news of Gensler’s comments Tuesday, Bitcoin fell as much as 4% but was still up more than 60% year-to-date.