SEC’s Gensler: Crypto Needs Regulation to Survive

Given the borderless nature of cryptocurrencies and financial technology, regulators from the US and Europe must be a united front, SEC leader said Wednesday


key takeaways

  • SEC Chairman Gary Genlser spoke to European regulators Wednesday about how to approach cryptocurrency classification and regulation
  • Consumer protection is the greatest concern for the SEC, Gensler insisted

US Securities and Exchange Commission Chairman Gary Genlser appeared before European lawmakers Wednesday to discuss cryptocurrency regulation, digital engagement practices and the controversial payment for order flow practice. Given the borderless nature of today’s financial system, Gensler said, collaboration between nations is essential. 

“Our global markets are inextricably linked, with money flowing between them in microseconds,” said Gensler via Zoom during a European Parliament committee hearing on economic and monetary affairs. “New financial technologies continue to change the face of finance for investors and businesses.” 

Gensler acknowledged growing investor interest in the digital asset space, but warned that without greater regulatory oversight, the industry will not advance. 

“While I’m technology-neutral, I am anything but public policy-neutral, and as new technologies come along, we need to be sure they’re achieving core public policy goals,” he said. “I’d like to note that financial innovations throughout history don’t thrive outside the public policy framework — they just don’t last that long unless we bring them inside.” 

When thinking about oversight around the cryptocurrency space, Gensler said, consumer protection is at the forefront, especially if tokens are considered securities, which under the current framework, they are. 

“I think that many of these crypto tokens have entrepreneurs behind them and the investing public is looking and hoping for profit based upon the efforts of that entrepreneurial group or the sponsors and the like. Under our US laws, reviewed by our Supreme Court, that often makes those investment contracts under our laws a security, because that’s how Congress wrote our securities laws in the 1930s,” said Gensler. 

Under US securities laws, securities must maintain high investor disclosure in order to protect against fraud, Gensler said. 

The SEC head also discussed payment for order flow, the controversial practice where brokers are compensated for directing client trades to market makers. The practice is disadvantageous to traders and there is a problem of concentration in the market, Gensler said. 

“It’s really spread around this small handful of market makers that are buying a significant portion of the retail activity in the US,” he said “We have probably approximately half of our market now not going to the lit exchanges, but rather going to the dark poles and the wholesalers that are also dark. It is an inherent conflict.” 

The discussion follows Gensler’s comments from earlier this week, when he revealed that banning payment for order flow is a possibility. Shares of Robinhood, which earns a significant profit from payment for order flow and allows the application to offer commission-free trading, fell on the news. Robinhood stock fell almost 7% Monday before rising and trading slightly higher Wednesday. 

“We’re learning from what you’re doing and trying to adopt,” Gensler said, referring to trading regulation in European markets. “Of course, we have different laws and different legal authorities, but we are hoping to adopt some of the good work you’ve done there and learn from it.” 

Want more investor-focused content on digital assets? Join us September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. Buy it now.


Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Screenshot 2024-05-23 091855.png


Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.



As part of the #Breakout2024 plans, Radix has introduced Token Trek


House members ask Gensler to keep a “consistent and equitable approach” with ether ETF proposals after the agency approved spot bitcoin ETFs in January


Using old-world instruments to address crypto user experience challenges goes against what this industry set out to do


And, weeks of a potential crypto ETF decision are no stranger to chaos


The FIT21 Act marks the second crypto-focused piece of legislation to advance in Congress this month


More than half of Solana transactions fail