Emily Walker
In a recent interview on Bloomberg Markets, Gary Gensler, who is stepping down as the Chair of the Securities and Exchange Commission (SEC), reflected on his time in office and discussed the role of cryptocurrencies in the U.S. financial landscape. With his term ending soon, he reiterated his critical view of the cryptocurrency market, stating it is full of “bad actors” and that many will not endure.
Crypto as the New Frontier
Gensler began the conversation by acknowledging the feedback he has received during his time at the SEC. He expressed gratitude for the opportunity, noting he is the 33rd person to hold this position and thanked President Joe Biden for his appointment. “It’s an honor to engage in these significant discussions that impact 330 million Americans,” he remarked.
When asked about the scrutiny he faced compared to his previous role heading the Commodity Futures Trading Commission (CFTC) during the financial crisis, Gensler said, “It does change.” He emphasized that the SEC’s priority remains to protect ordinary Americans and reduce market costs, acknowledging there may be dissent within the financial sector.
On the topic of cryptocurrency, Gensler pointed out that digital assets represent less than 1% of the U.S. capital markets, which he estimates to be around $120 trillion, yet they have commanded significant attention from the SEC.
He reiterated his characterization of crypto as a “Wild West” environment fraught with non-compliance. Citing enforcement actions from both his and Jay Clayton’s leadership, he noted, “Clayton initiated 80 enforcement actions; we’ve undertaken around 100 in four years.” He clarified that 5% of their enforcement efforts are directed at crypto, while 95% are focused on traditional fraud and scams.
Gensler emphasized the volatility and sentiment-driven nature of the crypto market, breaking it into two categories: Bitcoin, which constitutes a large portion of market value, and the multitude of other projects. He stated, “The public is quite aware of Bitcoin, which can represent two-thirds to 80% of the crypto market’s value,” highlighting that the remaining 10,000 to 15,000 projects often lack robust fundamentals.
According to Gensler, most of these projects thrive on public sentiment rather than solid foundations. He remarked, “I’ve never seen a space so reliant on sentiment rather than fundamentals, and many of these projects, akin to risk capital investments, will not survive.”
He also referenced numerous “pump and dump” schemes that have recently made headlines, mentioning notorious figures like Sam Bankman-Fried, with significant investor losses tied to these incidents.
Addressing his transition from academia—where he studied digital assets—to a more enforcement-oriented role at the SEC, Gensler explained that his focus has shifted. “In academia, you can observe and study. However, this role demands action, building on the groundwork laid by my predecessor. The crypto space is characterized by numerous challenges and a lack of compliance with existing securities laws,” he concluded.
As of now, Bitcoin is valued at $93,253.