Gensler/SEC Focuses on Regulating Stable Coins

Interesting/ominous article from today’s Wall Street Journal. Seems worth following. Is MakerDao in dialogue with the SEC and other potential regulators?

I would have posted this on Updates but dont have permission there. And regulatory risk is certainly risk.

SEC’s Gensler Doesn’t See Cryptocurrencies Lasting Long

Regulator says history of ‘wildcat banking’ in U.S. shows limited viability for private forms of money

SEC Chair Gary Gensler likened the thousands of cryptocurrencies in existence to the so-called wildcat banking era that took hold in the U.S. from 1837 until 1863.

By Paul Kiernan

Updated Sept. 21, 2021 4:20 pm ET

WASHINGTON—Securities and Exchange Commission Chair Gary Gensler said Tuesday he doesn’t see much long-term viability for cryptocurrencies, underscoring the importance of protecting investors in the market and bringing it under regulatory oversight.

Mr. Gensler likened the thousands of cryptocurrencies in existence to the so-called wildcat banking era that took hold in the U.S. from 1837 until 1863 in the absence of federal bank regulation. Before President Abraham Lincoln created the Office of the Comptroller of the Currency, banks issued their own currencies, which they sometimes refused to redeem for their purported value in gold or silver.

“I don’t think there’s long-term viability for five or six thousand private forms of money,” Mr. Gensler said in a virtual event hosted by the Washington Post. “So in the meantime I think it’s worthwhile to have an investor-protection regime placed around this.”

Mr. Gensler, who took office in April, previously taught a class on cryptocurrency at the Massachusetts Institute of Technology, raising hopes among some industry participants that he would be a friendly regulator. Instead, he has repeatedly likened the crypto market to the Wild West and urged crypto trading and lending platforms to register with the SEC, saying they are likely offering unregistered securities in violation of federal law.

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On Tuesday he took aim at stablecoins, a fast-growing segment of the crypto market that has attracted increased scrutiny from regulators in recent months. These tokens—including Tether, USD Coin and Binance USD—are pegged at a one-to-one ratio to the dollar and say they are backed by high-quality assets. They are used primarily to trade other cryptocurrencies.

“We’ve got a lot of casinos here in the Wild West, and the poker chip is these stablecoins at the casino gaming tables,” Mr. Gensler said. He said stablecoins often have aspects of both SEC-regulated investment contracts and banking products but that federal bank regulators don’t have all the authorities they need to supervise them.

In separate remarks Tuesday, Acting Comptroller of the Currency Michael Hsu said Tuesday the crypto industry is on a path that resembles that of credit derivatives ahead of the 2008 financial crisis. He expressed doubt that cryptocurrency is achieving its goal of promoting financial inclusion and criticized crypto instruments that promise steady yields to investors for failing to explain how those returns are generated.

“I have seen one fool’s gold rush from up close in the lead-up to the 2008 financial crisis,” Mr. Hsu said in remarks to the Blockchain Association, a crypto lobbying group. “It feels like we may be on the cusp of another with cryptocurrencies and decentralized finance.”


I think what SEC is trying to do is to make a certain amount of noise in order to raise awareness among both the public and elected representatives that current US regulations are not sufficient to be applied to crypto.

There are numerous references by Gensler to words as casinos, wild west, poker, and private currencies all intended to be associated with gaming, randomness, and periods of US history with far fewer rules compared to the present age.

May I remind you that SEC is at least presently not even able to force Tether to issue up-to-date backing (last statement is from March) of USD 68 billion of outstanding USDT?

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No. In the past they were uninterested in low-level introductory discussions.

At this point, I’m pretty hesitant to draw attention to ourselves without someone else in the room. I did ask Warren’s office if they would be open to facilitating a discussion (aka tell SEC to talk to us), and they were not interested. The SEC’s inability to make sweeping changes makes me thing for now it is best to cool our heels until we have a plan.

Not a lawyer, but as we offer no yield-bearing products (except DSR, which is for the most part mothballed) and do not hold deposits of consumers, I do think we are likely to be very far back on their list of actors they want to look at. I am also not especially worried about DAI, but very worried about MKR in their eyes, and am really eager to not issue new MKR.

I just realized I know this person. Went to college with him and worked at a newspaper together. Small world. Will reach out.

Our biggest critics use this a lot, and it is quite honestly a fair characterization of many corners of crypto. This is where Maker is unique amongst crypto, in that with enough time, our RWA program can provide a strong rebuke to this. We shouldn’t just accept any deal that comes to us, but especially easy-to-relate things like a solar farm or 6S financing commercial real estate are very tangible examples of crypto finance being used for “real” purposes. Whenever any of us talk to people outside


This is a one-sided article, along with many others I have come across. If you watched the interview, he was full of praise about the tech, by saying that ‘This technology is innovative’ - ‘its pushing a catalyst for change’ and went on to say that he enjoyed teaching Blockchain Tech at MIT. Also praised the competition this technology is bringing to Wall Street.

But lets be realistic–if experience investors (VCs) believe that 33% of startups generally go to zero, another 33% go sideways and eventually perish, 33% will make some noise, and only 1% become the next big thing–why do crypto folks think that every single sh*tcoin is going to be around until eternity? Unfortunately, nothing last forever…

First thing you might want to tell him is to not to write one-sided articles. I guess in retrospect, I should not be surprised Editors these days don’t care about the quality of journalism. I have a few friends in the sector, and it breaks their heart to have click-bait pressure instituted into their industry. What can you do… the days of Walter Cronkite are long gone.

Gensler wants to ‘protect investors’ which would mean some type of regulation may be coming. Both the SEC and CFPB are interested.

Its very uncertain what, if any regulation, will be approved but I suggest that its a key risk that needs to be tracked and perhaps mitigated.

I have been listening to Gensler’s lectures on crypto at his MIT course and he is clearly very focused on crypto and informed at least for a regulator.

Agreed - the Wild West crypto folks do not help the space as they give critics ammunition.

Again I think some form of regulation is eventually coming and it may help to get involved in the discussions as the regulations will define what is reasonable activity and what is not. This is often where connected lobbyists become involved as they know the players…

Perhaps we need to develop a plan? I generally think its good to be proactive on this types of regulatory risk