Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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SEC Chair Gary Gensler speaks to Yahoo Finance about Bitcoin ETF, DeFi and Stablecoins
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 and crypto trading
Video Transcript of SEC Chair Gary Gensler with Yahoo Finance interview by Brian Cheung (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.
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BRIAN CHEUNG: Just wondering if you had any thoughts about how those two products rolled out, the ones from ProShares in addition to Valkyrie. Is anything that you're seeing, the volume and interest in this brand new product also guiding your thoughts on maybe the possibility of these applications that you're working through on a Bitcoin spot ETF? 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?
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.
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?
See: SEC likely to target stablecoins this week, report says
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.
BC: What you kind of said right there about the amount of volume that we've been seeing in this space does kind of also extend to the broad DeFi movement. Just wondering what your thoughts are on DeFi. Obviously, it stretches into a lot of different areas. What do you feel like the SEC's role is in regulating that space? Just kind of your broad thoughts on that.
GARY GENSLER: Decentralized finance has started to press up some other innovations. While that's all interesting, it reminds me a lot about when peer-to-peer lending came along about 15 years ago. People said, well, I'll lend money to you and it would just be peer-to-peer. And we had to take 3, 4, 5 years to bring it within an investor protection, and in some cases, banking regulation.
See: SEC says GameStop’s wild stock surge was not short covering
And I would say that's what we're going through right now. The same process, hopefully, we get to the other side where whatever innovation it's there survives. But again, the public is protected. We protect against financial stability concerns as well. There's a lot of lending going on. There's a lot of trading going on. And without protections, I fear that it's going to end poorly.
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