Securities and Exchange Commission Chair Gary Gensler has described the cryptocurrency industry as "the Wild West"
Securities and Exchange Commission Chair Gary Gensler has described the cryptocurrency industry as "the Wild West." POOL / EVELYN HOCKSTEIN

KEY POINTS

  • Gensler said the more 'fundamental' question was whether U.S. investors were appropriately protected
  • He also said even as crypto made a 'small piece' of the SEC's oversight scope, scams and frauds 'outsized' the sector
  • The SEC chair previously refused to answer Congress regarding Ether's appropriate classification

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler was put in the spotlight Tuesday when he was directly asked whether Ether (ETH), the native cryptocurrency of the Ethereum blockchain, was a commodity or a security. He refused to answer the question directly, as he did during a Congress hearing last year.

Gensler was asked in an interview with CNBC Squawk Box host Andrew Ross Sorkin Tuesday about the "fundamental question" in the crypto space at this time, which is whether Ether is a commodity or a security and whether an ETH exchange-traded fund (ETF) will be approved or not.

The SEC chief quickly clapped back with another question. "To me, the fundamental question is, 'How do we ensure the American investor is protected?' And right now, they're not getting the required or needed disclosures, and the intermediaries in the center of this rather centralized market generally are conflicted in doing things we would never allow the New York Stock Exchange to do."

His refusal to answer whether or not ETH is a commodity or a security is similar to his response to Rep. Patrick McHenry, R-N.C., during a House Financial Services Committee hearing in April 2023. Gensler dodged the repeated questions of McHenry on Ether's status as a commodity or a security.

However, blockchain technology company Consensys recently revealed in a filing that the SEC already viewed Ether as a security before the said hearing. The regulator ordered an investigation into ETH's status as a security and proceeded to subpoena entities and individuals engaging in business with Ethereum, the company said.

Asking about the months-long issue regarding the SEC's stance on ETH, Sorkin also asked Gensler how the regulatory agency views its regulatory priorities. Sorkin pointed out that "it's hard to tell how much of your focus today is on the stock market" versus its focus on the crypto industry.

"Crypto is a small piece of our overall markets, but it's an outsized piece of the scams and frauds and problems in the markets," the SEC chair responded.

His latest comments came after the crypto community and several lawmakers demanded that the SEC and Gensler be held accountable for their "misleading" statements regarding the world's second-largest digital asset following Consensys' exposé.

The House's Financial Services Committee said classifying Ether as a security "contradicts" previous statements made by the regulator and Gensler himself. McHenry said the revelation was just another example of the SEC's "arbitrary and capricious" regulatory approach toward digital assets.

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