Broader Crypto Is Noncompliant, Should Prove Utility, But Bitcoin Has A Future: Gensler

Outgoing U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler was in the hot seat in Tuesday interview as he was grilled about the financial regulator's litigation-first policy under his rule.

Gensler was quick to defend himself and his SEC, saying it is "a law enforcement agency" that needed to protect the investing public from fraud, manipulation, and other securities laws violations.

The Case of Bitcoin

In the CNBC interview Tuesday, host Joe Kernen pointed out that in the case of Bitcoin, Gensler either "stood in the way of a totally new industry, or you were unable to prevent a huge bubble from forming, which is going to end very badly, and neither one is going to be much of a legacy to look back on."

The outgoing SEC chief reiterated that he has never branded Bitcoin as a security but believes that "these 10,000 or 15,000 other tokens" have "hurt" investors for many years.

Kernen went on to note that if Bitcoin had a hard time evolving under the Gensler SEC, "it's very difficult for anything good to happen," suggesting that the previous leadership in the SEC, Gensler included, appeared to have put up multiple obstacles in the crypto industry's way.

Gensler said he was just a few months in the job when Bitcoin exchange-traded funds (ETFs) based on futures were approved. Kernen quickly rebounded with a battle-ready answer: "After a lawsuit."

Kernen's words have much weight, given how spot Bitcoin ETFs took a decade before they were finally approved in January 2024 after a lawsuit that seemed to force the regulatory agency to give in. Ethereum ETFs were approved a few months later.

The Case of Other Digital Coins

For Gensler, other digital currencies beyond Bitcoin are non-compliant with securities laws and require oversight.

"A sector of this field, crypto, the investing public is investing based on projects and these things would prejudging any one of them, many of them are under the securities laws. And in that field, there's a lot of noncompliance," he said.

Notably, Gensler has been criticized by many in the crypto space for not being straightforward about the legal status of Ethereum, even when he was asked under oath.

After ETH ETFs were approved, Gensler still did not provide clarity on whether Ethereum is a security or a commodity. It remains to be seen whether the new leadership will give clarity on this matter.

Bitcoin Has a Future: Gensler

While Gensler still argued that BTC is a highly speculative and volatile asset, he believes there's a future for the world's largest cryptocurrency by market cap if majority of the world's population want to trade it.

"...I think that Bitcoin is a highly speculative, volatile asset. But with 7 billion people around the globe, 7 billion people want to trade it just like we do have gold for 10,000 years. We have Bitcoin. It might be something else in the future as well," Gensler said.

What about the thousands of other coins in the crypto market? For Gensler, they have to prove their utility. They need to "show that they actually have fundamentals underlying them or they won't persist," he projected.

Gensler will step down as SEC Chair on January 20, during incoming President Donald Trump's inauguration. Trump has nominated former Commissioner Paul Atkins to replace him.

Atkins' nomination was widely embraced by crypto users – both small holders and key industry players – as he is expected to flip the script for a more positive and forward-looking approach toward regulating digital assets.