Washington Post Interview | SEC Chairman: Cryptocurrency funds lack long-term viability, stablecoins are like chips on a gambling table

Yesterday, Washington Post columnist David Ignatius interviewed the Chairman of the U.S. Securities and Exchange Commission, Gary Gensler, discussing the ongoing Evergrande real estate crisis in China that has impacted global financial markets, the regulatory direction of the cryptocurrency industry, and criticisms towards stablecoins. The interview can be found here.

Views on the Evergrande Event

Regarding the liquidity issue arising from the excessive debt of the Chinese real estate company Evergrande, David Ignatius compared it to the Lehman Brothers crisis in the United States in 2008, and asked Gary Gensler whether the U.S. financial market would be somewhat protected in such a black swan event. Gensler's response seemed somewhat conservative, stating:

The U.S. made reforms to the financial system after the 2008 financial crisis to better absorb shocks. But this does not mean we are insulated from the global financial system. Our economy is interconnected with the world.

Current SEC Regulatory Focus and Views on the Crypto Industry

Before discussing issues related to the crypto industry, Gary Gensler made a statement, noting that the crypto industry is prompting global central banks to rethink existing payment systems, leading to financial reforms, known as "Fintech." However, for this industry to develop smoothly, it must adhere to societal and public policy guidelines. Gensler pointed out:

We must protect investors and consumers and ensure other public policy goals, such as people complying with tax and anti-money laundering regulations.

When David Ignatius asked about the current regulatory direction and goals of the SEC, Gary Gensler stated that when cryptocurrencies exhibit attributes of investment contracts, notes, stocks, or bonds, the SEC has significant authority. However, the real issue lies in the trading platforms or lending platforms. He said:

These platforms have hundreds to thousands of cryptocurrencies, some of which fit the definition of securities. They should be regulated and figure out how to register, but currently not many platforms are doing so.

David Ignatius also expressed concerns about the overwhelming regulatory news at present. In the early stages of the crypto industry's development, it attracted a large number of people because it was not regulated by banks or traditional financial institutions and was not constrained by traditional regulations. He wondered if Gary Gensler was worried that it might eventually turn into a reverse arms race, where people continuously find ways to evade scrutiny. However, Gensler stated:

New technology is usually a good thing; it challenges the system. But I don't think new technology can really exist outside the standards of public policy in the long run.

He views the current flow of funds in the crypto industry as private funds and analogizes cryptocurrencies to the Wildcat banking era of the 19th century. "Public funds have a certain status globally. Private funds usually don't last that long. Therefore, I don't think five or six thousand private forms of funds have long-term viability," stated Gary Gensler.

Concerns About Stablecoins

In the final part of the interview, Gary Gensler expressed some criticisms of stablecoins, stating that they urgently need regulation to avoid causing stability issues in the financial market. He said:

Stablecoins are like poker chips in a casino right now. We have a lot of casinos in the Wild West, and stablecoins are the poker chips on those tables.