Former and current SEC Chairmen discuss at Cryptocurrency Summit, Gary Gensler: Blockchain has become a catalyst for payment revolution.

Former SEC Chairman Jay Clayton and current Chairman Gary Gensler engaged in a public conversation for the first time, with Jay Clayton, now an advisor to crypto firm One River, moderating and posing many regulatory questions to Gensler. Gensler reiterated his stance on protecting investors and defended his past decisions.

Gary Gensler and Jay Clayton discussed various crypto regulatory issues at the DACOM The Digital Asset Compliance & Market Integrity Summit hosted by the crypto platform CryptoCompare.

The conversation mainly revolved around Gary Gensler's views on crypto regulation, with both pointing out that they see a promising future in the crypto space, but one that must involve regulatory agencies.

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Bitcoin as a Financial Catalyst

Jay Clayton mentioned that he has served as an advisor to various crypto institutions and has indeed seen the vision for capital efficiency. However, for Gensler, all of this is limited to operating in an environment trusted by regulatory agencies. Gensler stated:

Due to my position, I should remain neutral towards new technologies, but regardless of who Satoshi Nakamoto is, blockchain should become a catalyst for changing the global payment system. Central banks and the private sector should be aware that payment systems will become different due to these so-called decentralized value transfers.

However, Gensler also pointed out that although these crypto assets claim to be currencies, they are rarely used for general purposes such as a medium of exchange and are mostly positioned as value storage tools. He also mentioned that Jay Clayton had stated in 2018 and 2021 that Bitcoin is a value storage tool.

Are Cryptocurrencies like Wildcat Banking?

Jay Clayton then asked Gensler about his comparison of cryptocurrencies to the 19th-century Wildcat banking era in September of this year.

Gensler explained that indeed there were many unregulated private institutions issuing private banknotes back then, which later gave way to the US dollar and central banks, similar to some cryptocurrency projects:

Many projects raise funds from entrepreneurs in the cryptocurrency market and then turn to legislators and lawyers asking, "How do we avoid regulation?" I don't think this is the right way. This is indeed similar to the Wild West, where investors are not adequately protected, which could lead to a loss of trust in this technology by the public.

Call for Collaboration with Regulation

Both also mentioned the growing DeFi sector, attributing the current inability to fully monitor the crypto industry to its decentralized nature, which is widely distributed globally, making a single regulatory network more challenging.

Gensler believes that innovations based on DeFi may come true, but if they cannot operate within a regulatory framework, they will not be able to sustain development, and many DeFi tokens offer specific returns, indicating the need for SEC oversight.

However, Clayton pointed out that crypto assets are moving towards centralization, which is often the way emerging industries develop, just as traditional finance eventually centered around the New York Stock Exchange, which will reduce regulatory barriers.

Gensler reiterated that digital asset exchanges and platforms need to be registered with the SEC, and although this may increase companies' compliance costs, failure to comply may result in enforcement actions.