SEC Chair Gary Gensler- “Cryptos Will More Likely Remain a Store of Value Than a Currency”

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler expressed skepticism about the widespread use of cryptocurrencies, like Bitcoin (BTC), as a means of payment. Instead, he envisions these digital assets primarily serving as a store of value. Gensler made these remarks during a recent event at NYU School of Law, where he addressed questions regarding the implications of bringing cryptocurrencies under regulatory scrutiny.

Cryptocurrencies, A Regulatory Perspective

When asked about the value of cryptocurrencies if they were fully integrated into the regulatory framework, Gensler emphasized that the SEC remains “merit neutral.” He pointed out that the investing public should ultimately determine the utility of any cryptocurrency, relying on adequate disclosures. Drawing on his academic background from MIT, he noted that discussions about the nature of currency trace back to ancient philosophers like Plato and Aristotle.

He stated, “This is 3,000 years of history. Hundreds of great nations, thousands of nation-states – we tend to have one currency per geographic economic state. We tend even not to have bimetallism.” Gensler referenced Gresham’s law, a 19th-century economic principle, to highlight that “bad money drives out the good.” He emphasized that nations typically favor a single currency due to its roles as a store of value, medium of exchange, and unit of account.

Gensler remarked, “It’s unlikely this stuff is going to be a currency. It’s going to have to show its value through disclosure, through use,” suggesting that cryptocurrencies must prove their worth in the same manner as stocks traded on exchanges.

During his conversation with NYU Law Professor Robert Jackson, Gensler defended the SEC’s vigorous enforcement actions against the crypto industry, citing the need for regulatory oversight. “Without a cop on the beat, will all our laws be enforced?” he posed, underlining the prevalence of fraud and scams in the cryptocurrency sector. He commented on the current state of the industry, stating, “With all respect, the leading lights of this field in [2024] are either in jail or awaiting extradition right now.”

Gensler also indicated that the SEC’s existing regulatory framework, established by the Supreme Court in 1940, suffices for overseeing cryptocurrencies. He referred to the Howey Test, stating that it is a time-tested measure for defining investment contracts. “If anybody is wondering whether [they] might meet this time-tested test of what is an investment contract … think about it this way, who is signing the engagement letter with your law firm?” he said.