SEC Chair Gensler on bitcoin ETF approval: The underlying asset is highly speculative and volatile

SEC Chair Gary Gensler joins ‘Squawk Box’ to discuss the agency’s approval of 11 spot bitcoin ETFs, what the decision means for investors, prospect of future crypto ETFs, and more.

NEARLY $5 BILLION WORTH OF SHARES ACROSS THE ETFs ON ONE DAY. FOLLOWING THAT DECISION THAT SOME DESCRIBED AS HISTORIC IS S.E.C. CHAIR GARY GENSLER. CHAIR GENSLER, WE APPRECIATE YOU BEING WITH US. LET ME START BY ASKING YOU THIS, DO YOU CONSIDER THE DECISION

HISTORIC AND IT APPEARS THAT IT IS A DECISION YOU MADE EITHER RELUCTANTLY OR PERHAPS EVEN BEGRUDGINGLY. >> WELL, LOOK, ANDREW, THIS HAS BEEN CONSIDERED FOR A LONG TIME, AS YOU KNOW, STARTING UNDER CHAIR CLAYTON, WE HAD DISAPPROVED A NUMBER OF THESE OVER THE YEARS.

AND SOMETHING HAD CHANGED. I BELIEVE DEEPLY IN THE RULE OF LAW AND RESPECT FOR THE COURTS AND TAKING A NEW COURT DECISION INTO CONSIDERATION, WE MOVED FORWARD. I THINK THIS IS THE MOST SUSTAINABLE PATH FORWARD. >> SO, IT APPEARS, THOUGH, FROM WHAT YOU’RE SAYING, AND READING

THROUGH THE DECISION AS WELL, THAT WHAT CHANGED IS NOT NECESSARILY SOMETHING INHERENT TO CRYPTO OR BITCOIN PER SE, BUT WHAT CHANGED WAS WHAT THE COURTS DID. IS THAT THE WAY TO THINK ABOUT THIS? >> AGAIN, WE DO EVERYTHING HERE AT THE EXCHANGE COMMISSION

WITHIN THE LAW AND WITHIN HOW THE COURTS INTERPRET THOSE LAWS. AND THAT’S WHAT THE AMERICAN PEOPLE EXPECT AND THAT’S WHAT WE DO HERE. >> WHAT IS YOUR MESSAGE TO INVESTORS ABOUT BITCOIN NOW? WE’RE GOING TO HAVE ALL SORTS OF PUBLIC INVESTORS NOW POTENTIALLY

HAVE ACCESS TO BITCOIN IN A WAY THEY DIDN’T BEFORE, WE WERE JUST TALKING TO LARRY FINK, HE SAID THAT HE GOT A HUGE WAVE OF NEW INVESTORS GETTING INTO BITCOIN THROUGH THIS ETF. YOU HAVE STILL SUGGESTED TO BE CAUTIOUS ABOUT IT, AND I’M

TRYING TO UNDERSTAND HOW YOU THINK ABOUT THOSE CROSS CURRENTS IN TERMS OF THE MESSAGE YOU’RE TELLING INVESTORS? >> WELL, LOOK, BITCOIN ITSELF, WE DID NOT APPROVE, WE DO NOT ENDORSE THIS IS A PRODUCT CAUGHT IN EXCHANGE TRADED PRODUCT, A WAY THAT INVESTORS CAN INVEST IN

THAT UNDERLYING NONSECURITY COMMODITY CALLED BITCOIN. BUT, YES, INVESTORS, I THINK SHOULD BE AWARE THAT THIS — THE UNDERLYING ASSET IS A HIGHLY SPECULATIVE, VOLATILE ASSET, AND AMONGST ITS USE CASES IS REALLY FOR ILLICIT ACTIVITY, MONEY LAUNDERING AND SANCTIONS AND RANSOMWARE AND THE LIKE.

AND I KNOW THAT YOU ASKED OTHER PEOPLE OVER THE LAST FEW DAYS, IS IT BEING USED AS A STORED VALUE? IT IS A SPECULATIVE VALUE STORE VALUE. IS IT BEING USED AS A PAYMENT ANYWHERE? ARE WE BUYING CUPS OF COFFEE WITH IT? NOT REALLY.

THE ONLY PAYMENT MECHANISM THAT IS BEING USED FOR IN A PRIMARY SENSE IS ILLICIT ACTIVITY. SO I THINK YOU HAVE BEEN SPOT ON ABOUT THAT, ANDREW. >> SO, ON THAT NOTE, MR. CHAIRMAN, SOMEONE — THIS IS — I’M NOT GOING TO TAKE, YOU KNOW,

EITHER SIDE ON THE WHOLE THING. IT IS KIND OF FUNNY, BUT THESE ARE — I DON’T KNOW THE EXACT UNITS, BUT IF YOU LOOK SINCE 2017, WHAT HAS BEEN USED TO LAUNDER MONEY, 20,000 IS THE UNIT FOR — 20,000 IS THE UNIT FOR A DOLLAR.

33 IS THE UNIT FOR BITCOIN. SO, THAT IS A MULTIPLE OF I DON’T KNOW HOW MUCH FOR DOLLARS BEING USED FOR MONEY LAUNDERING VERSUS BITCOIN. NOW I COULD SEE BITCOIN SAYING, REALLY? IT IS NOT EVEN GOOD FOR MONEY LAUNDERING, IT HAS ZERO VALUE.

I COULD SEE THAT AS ANOTHER ARROW IN THE QUIVER FOR THE BEAR CASE. THE QUESTION I WANTED TO ASK YOU WAS LET’S TAKE THE CONTINUUM, LET’S TAKE THE RAT POISON, JAMIE DIMON, CHARLIE MUNGER, VERSUS WE HAD YESTERDAY ON OUR COINBASE CEO, DID YOU HEAR HIM MAKE THE

CASE FOR BITCOIN? IT WAS ALMOST LIKE A SYMPHONY TO BITCOIN BULLS, CHAIR GENSLER. THE PROOF OF WORK, AKIN TO GOLD, EVERY MONETARY ASPECT WE HAD FOR THOUSANDS OF YEARS IS REPRESENTED PERFECTLY AND TOM LEE, THERE HAS NEVER BEEN A MISTAKE ON THE BLOCKCHAIN OUT OF TRILLIONS OF TRANSACTIONS.

YOU UNDERSTAND IT, YOU TAUGHT AT M.I.T. WHICH IS IT? IS IT A BEANIE BABY IN YOUR VIEW, OR IS IT SOMETHING THAT HAS INHERENT VALUE THAT IS GOING TO BE PART OF THE FINANCIAL SYSTEM DECADES FROM NOW? WHICH IS IT? >> LOOK, NO DOUBT THERE ARE

INNOVATIONS WITHIN THIS FIELD AND THOSE INNOVATIONS WHICH I TAUGHT ABOUT AT M.I.T. AROUND A LEDGER SYSTEM, JUST AN ACCOUNTING SYSTEM CALLED THE BLOCKCHAIN TECHNOLOGY. BUT THERE IS AN IRONY IN THE MIDST OF THIS, SATOSHI NAKAMOTO SAID THIS WOULD BE A SYSTEM. AND THIS LED TO CENTRALIZATION.

THINK ABOUT THE IRONY WHO SAID THIS WEEK IS HISTORIC. THIS WAS ABOUT CENTRALIZATION AND TRADITIONAL MEANS OF FINANCE THAT INVESTORS WHO COULD ALREADY EXPRESS THEMSELVES IN BITCOIN, YOU COULD ALREADY, BEFORE THIS WEEK, BUY IT THROUGH MAJOR BROKERAGE HOUSES, BUT NOW YOU

CAN BUY IT THROUGH THIS THING CALLED AN EXCHANGE TRADED PRODUCT AS WELL. CENTRALIZED. >> THE UNDERLYING ASSET STILL HAS THE DECENTRALIZED DISTRIBUTED LEDGER, ALL THOSE CHARACTERS. THAT SOUNDS LIKE A, I DON’T KNOW — >> WITH OUR RESPECT, THERE IS A LOT OF CENTRALIZATION HERE.

AND EVEN THE UNDERLYING LEDGER, LARGELY THE BITCOINS PRODUCED BY A HANDFUL OF MINING COMPANIES AND THE LIKE, AND SO I’M SAYING IN TERMS OF MONETARY HISTORY, MONETARY HISTORY, WE HAVE A DOLLAR, WE HAVE A YEN, WE HAVE THE REM MB AND THERE IS A REASON FOR IT.

BECAUSE WE DO HAVE A COMMON SOME THAT RELIES ON THOSE CURRENCIES. >> LET ME ASK YOU THIS, IS THERE A POSSIBILITY, DESPITE THE FACT THAT THIS HAS BEEN NOW APPROVED, THAT THIS SPOT ETF HAS BEEN APPROVED, THAT YOU COULD SEE A DAY WHERE BITCOIN ITSELF IN SOME

WAY WOULD BE OUTLAWED? I ASK BECAUSE IF YOU RECALL, THERE IS A LAWSUIT TAKING PLACE BETWEEN COINBASE AND THE S.E.C., THEY WENT PUBLIC AND THEY NOW MADE — YOU HAVE COME BACK AND SAID THERE ARE CERTAIN UNREGISTERED SECURITIES AND THE LIKE THAT ARE ON THEIR PLATFORM,

THEY SAY, WELL, YOU APPROVED US THE FIRST TIME, HOW CAN YOU COME BACK AND SAY THIS IS NOT KOSHER? AND SO I THINK THERE IS THIS OTHER QUESTION ABOUT IT, I KNOW YOU’RE NOT ENDORSING BITCOIN, DOES THAT STILL OPEN UP THE POSSIBILITY THAT BITCOIN COULD

SOMEHOW COME UNDER FIRE FROM THE S.E.C. OR SOME OTHER AGENCY? >> LOOK, LET ME TALK ABOUT THIS FIELD MORE BROADLY. THE AMERICAN PUBLIC IS AWARE OF THIS. IT IS RIFE WITH CONFLICTS, IT IS RIFE WITH FRAUD AND ABUSE, WITHOUT PREJUDGING ANY ONE TOKEN, MANY OF THESE TOKENS, I

WOULD SUGGEST MAJORITY OF THESE TOKENS ARE ACTUALLY SECURITIES UNDER THE SECURITIES LAW. AND SO THE PLATFORMS, THE VARIOUS PLACES THAT YOU MIGHT BUY OR SELL THESE CRYPTO SECURITY TOKENS NEED TO COME INTO COMPLIANCE WITH THE FEDERAL LAWS. >> WHAT DID YOU MAKE OF WHAT

ELIZABETH WARREN WHO WAS VERY SUPPORTIVE OF YOU TAKING THIS ROLE ORIGINALLY COMING OUT AND SAYING THE S.E.C. IS WRONG ON THE LAW AND WRONG ON THE POLICY? >> I HAVE DEEP RESPECT FOR THOSE WHO MAY HAVE BEEN ON THE OTHER SIDE OF THIS.

BUT, AGAIN, DEEP RESPECT FOR THE LAW AND HOW COURTS INTERPRET THE LAW. WE HAD D.C. CIRCUIT, THREE JUDGE PANEL RULE ON THIS. WE LOOKED AT IT, I THOUGHT THIS WAS THE MOST SUSTAINABLE PATH FORWARD. >> HOW DO YOU THINK ABOUT OTHER CRYPTOCURRENCIES, PEOPLE NOW

TALKING ABOUT WHETHER THERE SHOULD BE AN ETHEREUM ETF AND THE LIKE. IS THAT SOMETHING YOU THINK YOU WOULD TAKE ON PROACTIVELY? IS THAT SOMETHING THAT ULTIMATELY IN THE SAME WAY THAT GRAY SCALE HAD TO GO TO COURT, DOES THE COURT DECISION AROUND

BITCOIN TO YOU ACT AS A PRECEDENT ON OTHER CURRENCIES? >> I LOOK AT WHAT WE DID THIS WEEK AS IT IS CABIN TO ONE NONSECURITY COMMODITY CALLED BITCOIN, LIKE WE HAD GOLD, SPOT EXCHANGE TRADE