BIG NEWS: SEC Chair Gary Gensler Says Crypto Unlikely to Become a Currency

SEC Chair Gary Gensler has made it clear that he’s skeptical about cryptocurrency becoming a real currency. In a recent statement, he pointed out the risks and challenges of the crypto market, including fraud, and emphasized that the leading figures in the industry are facing serious legal trouble. This article will explore Gensler's views on crypto, the issues of fraud in the space, and what it means for the future of digital currencies.

SEC's Gensler: Crypto Unlikely as Currency

According to reports , SEC Chairman Gary Gensler expressed doubts about the likelihood of Bitcoin (BTC) or other cryptocurrencies becoming widely accepted as a common payment method. Instead, he believes they are more likely to be viewed as a store of value.

During an event at NYU School of Law in Manhattan, Gensler addressed a question about the role of cryptocurrencies, which were initially designed to operate outside of government control. He emphasized that their potential value to users would be shaped by how they fit into regulatory frameworks.

Gensler explained that the SEC takes a neutral stance, leaving it up to investors to determine the utility of any cryptocurrency through proper disclosures. He added, "I taught this subject at MIT, so I can say this – these discussions go back thousands of years, to philosophers like Plato and Aristotle." He pointed out that throughout history, nations have generally settled on a single currency for their economies, rather than multiple currencies or bimetallism.

Referencing Gresham's law , a 19th-century economic principle stating that "bad money drives out the good," Gensler highlighted that most countries prefer to have just one currency. He noted that this is because a single currency acts as a store of value, a medium of exchange, and a unit of account, all of which benefit from network economics.

Gensler suggested that it's unlikely for cryptocurrencies to become mainstream currencies, emphasizing that their value will need to be proven through practical use and transparent disclosures—similar to how investors choose from thousands of securities on the stock exchange.

Enforcement and Regulation: Gensler’s Take on Crypto Oversight and Fraud

During an extensive discussion with NYU Law Professor Robert Jackson, SEC Chair Gary Gensler stood by the agency's strong stance on enforcing regulations in the cryptocurrency space.

"Without a regulator actively overseeing, would all our laws be upheld?" Gensler asked. "It's part of human nature, especially in finance, to push the limits. Sometimes, we have to step in with enforcement actions to steer people back within the boundaries."

Gensler criticized the crypto industry for being filled with "fraudsters, grifters, and scams," noting, "In 2024, many of the leading figures in this space are either behind bars or awaiting extradition ."

He also argued that there’s no need for new regulatory frameworks beyond the existing Howey Test , established by the Supreme Court in 1940, which defines what constitutes an investment contract.

"If you're wondering if your crypto project passes this well-established test, just ask yourself: Who's signing the engagement letter with your law firm? There's always a central entity behind these operations. It defies logic to think there's no common enterprise involved," Gensler remarked.

When asked how the upcoming presidential election might affect the SEC, or if he would remain in his role if former President Trump were re-elected, Gensler declined to comment.