U.S. SEC Chair Expresses Doubts About Crypto’s Role as a Mainstream Payment Method

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As a seasoned researcher with over two decades of experience in the financial markets, I find myself constantly intrigued by the dynamic interplay between traditional finance and emerging technologies like Bitcoin and cryptocurrencies. The perspectives shared by Gary Gensler and Anthony Scaramucci at recent events highlight the ongoing debate surrounding the role and future of these digital assets.

At a gathering held at New York University’s School of Law, the head of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, voiced doubts about Bitcoin and other digital currencies becoming widespread methods of payment in the future, as suggested by Cheyenne Ligon’s report for CoinDesk. Gensler posited that digital currencies are more likely to function as a means to store value rather than being used for transactions, resembling commodities like gold or other investments.

In my analysis, I found myself pondering over Gensler’s insightful response to an inquiry regarding the integration of decentralized cryptocurrencies into a regulated financial landscape. Essentially, he suggested that for centuries, economic regions have favored using a single currency to maintain stability and efficiency. He invoked monetary theories dating back to philosophers like Plato and Aristotle as evidence.

Despite the growing popularity of digital assets, Gensler emphasized that cryptocurrencies must prove their value through transparency and disclosure, much like traditional securities. He noted that the SEC is “merit neutral” and that it is ultimately up to the investing public to decide the utility of any given cryptocurrency.

In his conversation, Gensler advocated strongly for the SEC’s firm regulatory approach, emphasizing that enforcement actions are crucial in upholding market honesty. He cautioned that the crypto sector is still heavily affected by a significant number of deceivers, swindlers, and cons, using high-profile legal incidents involving influential industry players as examples. He further stated that existing regulations, like the Howey Test dating back to the 1940s, are adequate for governing cryptocurrencies, and he dismissed suggestions for fresh regulatory structures.

Gensler declined to discuss possible effects of the upcoming U.S. presidential election on the SEC’s future course, nor did he mention any plans to stay in his role if former President Donald Trump were to be re-elected.

On the 22nd of August, Anthony Scaramucci, head of SkyBridge Capital, discussed his perspectives on Bitcoin and cryptocurrencies in a chat on CNBC’s “Morning Huddle.

At first, Scaramucci talked about the Wyoming Blockchain Symposium, emphasizing its tactical timing and proximity to the Federal Reserve’s central banking conference in Jackson Hole. This close placement was deliberate, aiming to underscore the decentralized character of blockchain technology against conventional central banking. The symposium drew a substantial number of prominent figures from the cryptocurrency sector, including Senator Cynthia Lummis, Senator Tim Scott, and former SEC Chairman Jay Clayton among others.

Anthony Scarmucci expressed confidence about Bitcoin’s future, particularly towards the latter part of 2024. He noted that the excessive supply appearing to decrease might be a promising indicator for Bitcoin’s price trend. Yet, he also touched upon a frequent argument between Bitcoin and gold. While gold has experienced a 30% growth over the last two years, Bitcoin’s value has mostly remained steady. Nevertheless, Scarmucci continued to support his view that Bitcoin is still in its initial development phase as technology rather than a means of storing value. He posited that with more than a billion digital wallets, Bitcoin could eventually be perceived as a method for storing wealth.

Scaramucci highlighted the potential of Bitcoin and other Layer 1 technologies to revolutionize payment systems and reduce transaction costs. He drew parallels to how technological advancements have previously reduced telecom costs and increased efficiencies in the economy. This, he believes, is the future trajectory for Bitcoin as it continues to integrate into the financial system.

A large part of the conversation focused on how the introduction of spot Bitcoin ETFs could influence the market. Scaramucci pointed out that regulatory approval for these ETFs makes it more secure for institutional investors to invest, as firms like Morgan Stanley now permit their financial advisors to recommend Bitcoin investments. He highlighted that the debut of spot Bitcoin ETFs, specifically BlackRock’s, has been exceptionally successful, setting a record for the most successful ETF launch ever with $23 billion in assets managed.

As an analyst, I admit that the anticipated Bitcoin price surge has taken longer than anticipated, primarily due to delays caused by regulatory challenges and market instability. Nevertheless, my optimism for Bitcoin’s future growth remains undeterred, as I confidently predict it will eventually surpass $100,000.

In his analysis of Bitcoin’s current market movements, Scaramucci pointed out that around 65% of investments are being made in spot Bitcoin ETFs, while the rest, about 35%, go directly into Bitcoin itself. He underscored the convenience of purchasing Bitcoin through these ETFs and holding it within brokerage accounts as a significant factor driving this trend. Furthermore, he hinted at Wall Street’s untapped potential to act as a “powerful selling machine” when it comes to Bitcoin and other digital currencies.

The conversation also touched on the regulatory environment and its impact on cryptocurrency. Scaramucci mentioned that while former President Donald Trump initially criticized Bitcoin, there has been a noticeable pivot in his stance, as well as in the broader political landscape. He referenced recent comments by Senator Chuck Schumer about the possibility of passing crypto legislation by the end of 2024, suggesting that there could be growing bipartisan support for crypto regulation heading into 2025 and 2026.

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2024-10-10 09:39