Gary Gensler: 'Thousands' of Cryptos are Securities

Securities and Exchange Commission Chairman Gary Gensler said in a Monday CNBC interview that bitcoin was the “only” cryptocurrency he was willing to call a commodity, and suggested he would like his agency to crack down on “thousands” of cryptos.

“Many of these tokens offer the investing public — or the investing public is hoping, I should say, hoping — for a return, just like when they invest in other financial assets we call securities,” Gensler said in a morning interview with the network’s Jim Cramer. “Some of them, they’re under the Securities and Exchange Commission. Some, like bitcoin — and that’s the only one, Jim, I’m going to say, because I’m not going to talk about any one of these tokens — but my predecessors and others have said, ‘They’re a commodity.'”

The distinction between a commodity and a security is that the latter is regulated by Gensler’s agency rather than by the Commodity Futures Trading Commission. If Gensler’s agency opts to apply traditional stock-market regulations to cryptocurrency, it will largely shut many projects — including Ethereum — out of the United States, and result in punitive fines for many early founders and investors.

Gensler said that in his view, that should be the future for potentially “thousands” of cryptocurrencies.

“What we have in the U.S. is we have this concept that you have market regulators like the CFTC and SEC to help protect the public against fraud and manipulation in the markets,” Gensler said. “When there’s a group of entrepreneurs that are selling something to the public, who are saying to the public ‘Come here, come hither, we’ve got this great idea’ — that when you do that, you’ve got to have basic disclosures, full and fair disclosures. That’s what the SEC does.

“And right now, you have hundreds, if not thousands, of these crypto tokens that have the basic attributes of raising money from the public,” he added. “And having a group of entrepreneurs … saying, ‘Come hither,’ that we’ve got a good idea for you [is] OK in America, if you comply with the laws, and unfortunately we’ve got, unfortunately, a lot of products that are noncompliant.”

Gensler’s agency is likely waiting for Congress to rule on the issue before it takes any major actions. Sens. Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced legislation this month that would take the general approach Gensler has requested by assigning authority for regulating the bulk of cryptocurrencies to his agency.

“Chairman Gensler agrees that bitcoin is a commodity,” Gillibrand noted in a Fox News interview with Neil Cavuto earlier this month. “So let’s start from there. For something to be deemed a security … you know, for example, when a company offers stock, it is offering that stock in exchange for money to build a company. If that is the formulation of a digital asset, it’s going to be deemed to be a security. … But if it’s being used in the context of a commodity like wheat or oil or gold, it’s going to be better regulated by those who understand that, which is the CFTC.”

The legislation will need to clear roughly four committees in the Senate. It isn’t expected to come up for a vote until sometime next year.

You can watch Gensler’s interview on CNBC above via YouTube.