Gensler’s Surprising Admission: Bitcoin Stands as ’Comparatively Safer’ Amid Crypto Chaos
In a twist that caught the digital asset world off guard, SEC Chair Gary Gensler singled out Bitcoin as a relative safe harbor in a sea of crypto volatility.
The Regulatory Spotlight Shifts
Forget the usual blanket warnings. The latest commentary draws a stark line between the original cryptocurrency and the sprawling universe of altcoins and tokens. It’s a rare moment of distinction from a regulator known for broad-brush skepticism.
What 'Safer' Really Means
This isn't an endorsement—let's be clear. In regulator-speak, 'comparatively safer' often translates to 'less likely to implode overnight and spark congressional hearings.' It acknowledges Bitcoin's established network and decentralized nature, factors that somehow still baffle the traditional finance crowd clinging to their spreadsheets.
The Rest of the Field on Notice
If Bitcoin is the benchmark for relative safety, the implication for thousands of other projects is glaring. The comment throws a harsh light on the speculative froth, unproven models, and, let's face it, the sheer nonsense that still floods the market. It’s a reminder that while innovation thrives, due diligence never takes a holiday.
The takeaway? Even the top watchdog recognizes a hierarchy in the crypto wilds. In a sector where hype often drowns out sense, a nod to foundational strength is a powerful signal. Just don't expect it to stop the next 'can't-miss' token launch promising to disrupt something that doesn't need disrupting—old habits, especially profitable ones, die hard in finance.
Bitcoin vs. speculative tokens
Gensler distinguished bitcoin from the remainder of the crypto ecosystem. He said Bitcoin has better-developed infrastructure that makes it relatively lower risk, but he called all other tokens, except stablecoins that are backed by U.S. dollars, speculative.
Because these tokens lack tangible fundamentals, their value often resides in investor sentiment rather than in more quantifiable metrics. Thus, retail and institutional investors must be more aware prior to participation in such markets.
Further, Gensler reiterated that investor protection is central to the mission of the SEC, “Investor protection remains at the Core of the SEC’s mission.”
Market centralization and ETFs
Gensler pointed out that crypto markets tend to become more centralized as they grow. “That which started as a decentralized ecosystem has become more integrated and centralized,” he said. He also discussed crypto exchange-traded funds (ETFs), which LINK digital assets more closely to traditional finance.
ETFs let investors access crypto without actually owning it, similar to how Gold or silver funds work. While this makes trading easier and boosts liquidity, it also ties crypto to traditional markets, which can affect its price swings.
Regulatory scrutiny and operational risks
Gensler also pointed out operational risks in financial markets, referring to the recent CME data center outage. The problem came from a cooling system failure, not a software glitch, and stopped trading for 10 hours. He explained that the backup systems weren’t used right away because the outage happened over Thanksgiving.
“If this were to happen at 10 a.m. on a Monday, the management team WOULD make a different decision and probably switch over to the backup data center more quickly,” he said. The incident highlights how important exchanges and clearinghouses are, while also showing the challenges of keeping markets running smoothly.
Crypto’s regulatory landscape under scrutiny
Gensler’s comments come amidst controversy over deleted SEC texts during his leadership. Republicans officially informed current SEC Chair Paul Atkins of the disappearance of Gensler’s messages, raising suspicion that crucial communications to commissioners and staff were deleted.
The Inspector General’s office reported that Gensler’s phone stopped syncing with the agency system, resulting in a factory reset. As a result, only 34 internal contacts were recovered, and the rest—other commissioners and input from Gensler’s staff—was not recovered. This incident fueled concerns about transparency and record-keeping within the SEC, drawing attention from both lawmakers and industry stakeholders.
Further, the Co-Founder of Gemini, Tyler Winklevoss, attacked Gensler’s stance as stifling the innovative ability of the crypto sector. On September 18, shortly after Gensler’s interview with CNBC, Winklevoss reiterated that overregulation significantly slows down crypto development.
Nevertheless, Gensler was undeterred, repeating that close to 100 fraud actions had been pursued under his guidance. He noted that most digital asset trading is based on HYPE and momentum, not on facts reflecting actual value, which makes it very risky for retail and institutional investors.
Also Read: Canary Capital Files for American-Made Crypto ETF
