As if he didn’t have enough to do, Gary Gensler appeared before the European Parliament on Sept. 1 to share his policy recommendations regarding the regulation of crypto assets and other matters. While the United States Securities and Exchange Commission Chair made clear that he was presenting his own views — not those of the Commission — his (virtual) appearance necessarily raised questions.
Does Gensler, regarded by some as America’s most crypto-savvy regulator, believe that cryptocurrency and blockchain policy has to be harmonized globally? If so, can he make common cause with the Europeans — or do the U.S. and the European Union have different priorities? More generally, are globally harmonized regulations even feasible, particularly in areas such as decentralized finance?
The questions didn’t end when the New York Times made cryptocurrency the lead story in its Sunday, Sept. 5 edition, observing that “the boom in companies offering cryptocurrency loans and high-yield deposit accounts is disrupting the banking industry and leaving regulators scrambling to catch up.”
It all begs the question: Wherefore the regulators?
“I think it is very telling to have the SEC chief over in the EU Parliament in the midst of the recent surge in cryptos,” Pablo Agnese, lecturer in the department of economy and business organization at the Universitat Internacional de Catalunya Barcelona, told Cointelegraph, adding, “Not only are they [i.e., regulators] playing a catch-up game, they are also trying to reach a political consensus, at least in the U.S.–EU relationship.”
Patrick Hansen, until recently head of blockchain at Bitkom — an association of German companies in the digital economy — opined that Gensler is undoubtedly aware of how decentralized and global the crypto community is, telling Cointelegraph, “With DeFi projects coming primarily out of the U.S. and Europe, he probably wants to ensure that both regions align on these issues in order to prevent regulatory arbitrage.”
A growing realization
“I’m not convinced that the recent high-profile meetings between U.S. regulators and their European counterparts represent a policy shift,” Geoffrey Goodell, a research associate at University College London and deputy executive director of the UCL Centre for Blockchain Technologies, told Cointelegraph. He added:
“There is a growing realization on both sides of the Atlantic that digital currencies are here to stay and could potentially introduce systemic risk, not only to investors searching for new sources of uncorrelated returns but also to monetary sovereignty.”
In his remarks before the EU parliament’s Committee on Economic and Monetary Affairs, Gensler noted that “this $2.1-trillion asset class is truly global. It has no borders or boundaries. It operates 24 hours a day, seven days a week.”
While affirming that he was “technology-neutral,” Gensler emphasized that “I am anything but public policy-neutral.” A sound public policy entails protecting consumers, curtailing illicit activity, and ensuring financial stability, he said, adding, “For those who want to encourage innovations in crypto, I’d like to note that financial innovations throughout history don’t long thrive outside of public policy frameworks.”
U.S. and Europe: Different concerns?
Still, crypto regulatory harmonization requires some agreement around the goals. Do European policymakers have different priorities from Americans? For example, Europeans might be more worried about the environmental harm caused by Bitcoin (BTC) mining while U.S. policymakers could be more focused on whether stablecoins are truly stable.
“Environmental damage is definitely a bigger concern in the EU, especially the EU Parliament,” where some political groups like the Greens want to ban proof-of-work consensus protocols, noted Hansen. As for stablecoins, most are denominated in U.S. dollars, so this is understandably an American…