Today Gary Gensler, Biden’s pick to Chair the U.S. Securities and Exchange Commission (SEC) had his Senate confirmation hearing. When it comes to digital assets, he believes most regulations should be technology neutral. He seemed to embrace cryptocurrency as a positive catalyst for change elsewhere. And cryptocurrency exchanges might need to watch out because he mentioned them more than once with respect to investor protection.
In response to a question from Senator Toomey, Gensler seemed open to discussing shortening equity settlement times, without making any commitments. That could encourage blockchain adoption for post-trade settlement.
Senator Bill Hagerty noted the regulatory challenges when technology changes rapidly and addressed digital assets specifically. “Using a Tennessee terminology, you don’t want to be shooting where the rabbit was,” observed Hagerty.
Gensler is no stranger to digital assets, given his recent role at MIT teaching blockchain and cryptocurrencies. He responded, “It’s always important to update our market oversight to new technologies, but I believe for most to be technology neutral.”
And continued, “If this new technology of cryptocurrency and potentially central bank digital currency (CBDC) comes along, it’s important to stay true to our principles of investor protection and capital formation but at the same time be technology neutral.”
In response to Senator Mike Rounds’ question about creating an environment to encourage innovation, Gensler said he is keen to promote innovation and the “innovations have been a catalyst for change. Bitcoin and other cryptocurrencies have brought new thinking to payments and financial inclusion. But they’ve also raised new issues of investor protection that we still need to attend to.”
And multiple times, he outlined that investor protection would not just apply to issuers of cryptocurrencies that are classified as securities. “If there’s exchanges that trade those, to ensure that there’s appropriate investor protection on those exchanges,” he added.
Apart from broader investor protection, Gensler also specifically mentioned custody requirements. He’s keen to protect investors from market manipulation and stated that some markets have been rife with fraud and scams, although he observed many are overseas.
He mentioned cryptocurrencies’ role as a change catalyst multiple times, but usually in terms of changes elsewhere. For example, he referred to CBDC and private payment systems that are exploring 24/7 activity and lower costs both domestically and internationally. Gensler also noted the use of blockchain for trade finance and medical records.
“I’m neither a maximalist nor a minimalist, but I think it’s really been a catalyst for change in numerous areas,” said Gensler.