Gary Gensler dismisses role of crypto in capital markets while fielding Bitcoin ETF questions

U.S. Securities and Exchange Commission (SEC) chair Gary Gensler spoke dismissively of spot Bitcoin ETFs in a conversation with Bloomberg on Dec. 13.

Gensler’s SEC today introduced new rules that are intended to reduce risk in the U.S. Treasury market. According to Reuters, those rules will require a greater number of trades to go through clearing houses and will introduce collateral requirements for central clearing agencies, among other things.

After Gensler spoke concerning the degree of leverage in the Treasury markets, Bloomberg reporter Kaily Leinz pivoted the conversation toward the multiple spot Bitcoin ETF applications pending with the SEC. Gensler smiled before saying:

“… There’s something very significant about the $26-trillion-dollar Treasury market, which is really basis of our entire capital market. It’s how we fund our government, it’s how our Federal Reserve does monetary policy, it’s how we maintain the dollar dominance around the globe, and you want to ask me about crypto?”

Gensler downplayed the importance of crypto ETFs by comparison, stating:

“Crypto securities are not only much smaller, [they’re] not how we fund our government, [they’re] not how we conduct monetary policy, and for many investors, they’ve been harmed in that market … and they’re being harmed because there’s too much non-compliance.”

Despite repeatedly emphasizing the importance of the new Treasury market policy, Gensler ultimately acknowledged that several spot Bitcoin ETFs are pending. He said that “somewhere between eight and a dozen” of those applications are in progress and added that staff of various divisions respond to these findings.

Gensler also acknowledged a court outcome, implied to be a ruling that requires the SEC to consider Grayscale’s ETF conversion application, in passing.

Gensler did not comment on approval chances

Gensler did not directly address Bloomberg interviewer Kailey Leinz‘s question, which asked whether the SEC’s current level of engagement is a sign of progress.

The SEC met with many spot Bitcoin ETF applicants in late November and met with others in December. Several applicants, including BlackRock, have submitted numerous amendments. Many discussions, in part, concern comparisons between cash and in-kind redemption and creation methods, a distinction that will determine whether some ETF participants can transact in crypto.

Despite Gensler and the SEC’s silence on whether a spot Bitcoin ETF might soon be approved, some industry members are hopeful. Bloomberg ETF analysts Eric Balchunas and James Seyffart have suggested that there is a 90% chance that a spot Bitcoin ETF will be approved by Jan. 10, 2024.