SEC chair warns cryptocurrency industry won't reach potential staying outside our laws

Chairman of the Securities and Exchange Commission Gary Gensler argued on Thursday that the cryptocurrency "field is not going to reach any of its potential if it tries to stay outside of our laws." 

He specified that those laws include those pertaining to money laundering, tax compliance and the SEC’s "focus," which is investor protection.

Bitcoin and other cryptocurrencies remain unregulated within the U.S. financial system. 

Gensler provided the insight on "Mornings with Maria" on Thursday as the industry has been waiting to see how the Democratic appointee will approach oversight of the crypto market, which he had reportedly said should be brought within traditional financial regulation.

On Thursday, Gensler called cryptocurrencies "innovative technologies," but also pointed out the potential risks associated with the evolving industry. 

Gensler told FOX Business host Maria Bartiromo on Thursday that the SEC is "neutral" on crypto, but not neutral about investor protection. 

He stressed that his agency focuses on investor protections, especially for working families. 

Earlier this month, Gensler called on Congress to give the SEC more authority to better police cryptocurrency trading, lending and platforms, Reuters reported, noting that he referred to crypto markets as a "Wild West" plagued with fraud and investor risk.

Ticker	Security	Last	Change	Change %
BITQ	EXCHANGE TRADED CONCEPTS TRUST BITWISE CRYPTO INNOVATORS E	11.39	-0.14	-1.21%
COIN	COINBASE GLOBAL INC.	223.61	-0.76	-0.34%

Gensler reportedly said the market involves many tokens, which may be unregistered securities, and therefore, could leave prices open to manipulation and millions of investors vulnerable to risks.

In April, cryptocurrencies reached a record capitalization of $2 trillion as more investors poured into investments of digital tokens. 

Bitcoin had been trading lower this week. The cryptocurrency dropped by more than 1% Thursday morning as cryptocurrencies declined. On Thursday morning the price was around $44,300 per coin and increased to around $45,700 by Thursday afternoon, according to Coindesk. 

For year-to-date returns, however, bitcoin is up 56% courtesy of a strong showing by bullish traders throughout the first half of this month as prices steadily rose from $38,000 on Aug. 4 to around $48,190 on Saturday.

Rivals Ethereum and Dogecoin were trading around $3,066 and 31 cents per coin, respectively, according to Coindesk.

Concerns about cryptocurrencies were raised Tuesday by Neel Kashkari, president of the Federal Reserve Bank of Minneapolis.

"I was more optimistic about crypto and bitcoin five or six years ago," said Kashkari. "So far what I’ve seen is… 95% fraud, hype, noise and confusion."

Kashkari made the comments during an appearance at the Pacific NorthWest Economic Region annual summit in Big Sky, Montana, and reported by Coindesk.

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Kashkari contrasted the open nature of the crypto field with the U.S. government’s monopoly on issuance of dollars.

"There are thousands of these garbage coins that have been created," the central banker said. "Some of them are complete fraud Ponzi schemes. They dupe people into investing money and then the founders rip them off."

Kashkari scoffed at the idea that bitcoin could serve as a safe haven from inflation, particularly the kind seen in some developing countries.

Gensler noted on Thursday that the interest in crypto "innovations" have "shown that we all want our payments to be faster and less costly." 

The Senate confirmed Gensler, President Biden’s pick, as chairman of the Securities and Exchange Commission in April. Gensler was a former financial regulator and Goldman Sachs Group Inc. executive. He ran the Commodity Futures Trading Commission, a smaller regulatory sibling to the SEC, from 2009 to 2013, according to the Wall Street Journal, which added that he "has a history of shaking up the status quo."

The newspaper reported that while at the Commodity Futures Trading Commission "he steamrolled the opposition to write rules from scratch governing the markets for hundreds of trillions of dollars of derivatives," adding that "some of these complex financial instruments were blamed for the 2008-09 financial crisis." 

Bartiromo asked Gensler what his priorities are in his new role as SEC chairman. 

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"I think markets every day are changing. Technology is rapidly changing markets and we can’t take for granted that we have the best markets," he responded. "I would like, at the end of my tenure, that we left the market even better." 

He went on to say that he believes there are "definitely things we can do" to make certain parts of "the market more transparent." 

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FOX Business’ Ken Martin contributed to this report.