CRYPTO MOVERS AND PRICES
Bitcoin (BTC) is leading a recovery in cryptocurrencies from last week’s selloff, topping USD 52,500 overnight. Spot volumes are less than half of the 30-day average.
Crypto Story of the Day
Yesterday's confirmation hearing for SEC Chairman nominee Gary Gensler featured reiterations that crypto will be allowed to grow on the SEC’s terms and calls upon Congress to define jurisdictions. Gensler’s confirmation follows remarks from SEC Commissioner Hester Peirce, in which she criticized “the lack of clarity around crypto.”
In his opening remarks, Gensler referenced his current role as a professor at MIT where his work is focused on fintech, crypto, and blockchain, adding that he believes fintech can be a “force for good - but only if we continue to harness the core values of the SEC…”
When asked by Republican Senator Bill Hagerty to explain the SEC’s approach to “digital assets” under his leadership, Gensler responded that he prefers the regulator to stay “technology neutral'' and true to principles of investor protection and capital formation. In reference to cryptocurrencies seen as commodities, “as [BTC] has been deemed to be,” Gensler said “it's either a question for Congress for how Congress would want that to be overseen or it's possibly a question for the [CFTC].”
Republican Senator Mike Rounds responded that he appreciates Gensler’s recognition of the SEC’s jurisdiction and “the role of the Congress in overseeing this and dealing with it,” adding that he believes “this is an area where [Congress] has great potential for leadership…”
In a separate line of questioning, Rounds asked what can Congress and the SEC do to create “a forward-thinking regulatory environment” for crypto. Gensler responded that “[BTC] and other cryptocurrencies have brought new thinking to payments and financial inclusion,” but at the same time have “raised new issues of investor protection.” Gensler added that he’d work to “promote technology” while protecting investors.
Overall, the hearing saw 15 mentions of cryptocurrency or digital assets, 3 of BTC, and 6 of blockchain. The previous SEC Chairman confirmation of Jay Clayton didn’t include any such mentions.
In a speech made on Monday, SEC Commissioner Hester Peirce described the agency as being “slow to provide regulatory certainty on a host of crypto-related issues, including when a sale of digital assets will be treated as a securities offering…” and that “Gensler will bring deep appreciation for the growth and ingenuity in the digital assets space and the need for regulatory clarity.”
We’ve written that Gensler’s previous remarks are in line with the sentiment among U.S. regulators who seemingly embrace crypto, but only under the condition that the space evolves on terms aligned with the Government’s interest. We feel that such a view has been confirmed by yesterday’s hearing.
That said, we also feel that Gensler hinted at the possibility of new regulatory frameworks being developed for cryptocurrencies seen as commodities; his call on Congress to decide how those assets would be overseen while only mentioning CFTC’s jurisdiction as a possibility has led us to believe this.
Note that in 2019, then CFTC Chairman Tarbert claimed that Ethereum (ETH) is a commodity and “therefore would fall under our jurisdiction.” We’ve also written that a possible avenue for crypto regulation is one where Congress gives the SEC additional authority to oversee crypto, as was suggested by former CFTC Chairman Timothy Massad.
Gensler’s evocation of Congress, and only a tepid reference of the CFTC, suggests Gensler may share elements of Massad’s view, who argued the CFTC is not well-suited to regulate such cryptocurrencies.
Nevertheless, should Gensler play a role in changing the way crypto is overseen, we still don’t feel any revised approaches would alter regulators’ views that crypto can only be allowed to grow aligned to the Government’s interests.