Stablecoins Are Poker Chips at the Casino Gaming Tables

David Ignatius of the Washington Post interviewed SEC chair, Gary Gensler, on the cryptocurrency landscape, where the latter provided his approach to regulating the digital asset industry.

Gensler expresses optimism for the possibilities crypto provides for enhancing finance, but he also believes that most of the space should fall under regulatory supervision – including stablecoins.

• At the start of the interview, Gensler commented on the recent market crash in the market of “crypto tokens” (the term some of his colleagues prefer, rather than ‘cryptocurrency’), calling it a “highly speculative asset class.”
• Though he believes there are innovations in the basic whitepaper Satoshi Nakamoto proposed a dozen years ago, he also said there is “often nothing standing behind [crypto] other than what someone else will pay you for it.”

• “I don’t think technologies last long outside of a social and public policy framework,” noted the chairman.

• Later in the conversation, when discussing which tokens fall under the SEC’s jurisdiction, Gensler argued that “most of these tokens are securities.” At the same time, only “some” are commodities, and some have attributes of both.
• He then pivoted to stablecoins, saying they “may have attributes of investment contracts,” while some “have attributes like banking products…”
• Gensler also added that the SEC is working under the guidance of secretary Janet Yellen to produce a report on stablecoins. Yellen is well known for her opposition to cryptocurrency on the grounds that they facilitate criminal activity.
• Towards the end of the interview, Gensler said he is regulating the cryptocurrency space in advance of an inevitable “spill in aisle three.” Knowing that there is no room for 5 or 6 thousand different forms of money, he is putting an investor protection regime in place before most of them fall off.
• “We’ve got a lot of Casinos here in the wild west,” he commented, “ and the poker chips are these stablecoins.”