WEBVTT - SEC Chair Gary Gensler Talks Crypto, Tenure as Chair

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Welcome to our listeners and viewers worldwide. I'm here with

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<v Speaker 2>Cheergary Gensler in his office in Washington, d C. Great

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<v Speaker 2>to speak with you, Great to be with you.

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<v Speaker 1>David.

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<v Speaker 3>You've had a very active agenda during your tenure here.

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<v Speaker 2>I want to get to as much of that as

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<v Speaker 2>I can, but I want to start first just by

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<v Speaker 2>asking you how you're feeling here with less than two

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<v Speaker 2>weeks left in your term. You have been subject to

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<v Speaker 2>fair amount of attacks, some vitriol. How have you processed

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<v Speaker 2>all of that.

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<v Speaker 4>It's a great privilege to be in a role like this.

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<v Speaker 4>I'm the thirty third chair. It's a big country. A

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<v Speaker 4>lot of people could do this job, so I really

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<v Speaker 4>I start with it's just such a privilege to be here,

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<v Speaker 4>and thank you to Joe Biden for asking me to

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<v Speaker 4>do it. But what's remarkable about this role is it

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<v Speaker 4>oversees the one hundred and twenty trillion dollars capital market,

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<v Speaker 4>which touches everything in our economy because you've got to

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<v Speaker 4>raise money for most of what we do in our

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<v Speaker 4>economy and people save. So I feel terrific, And you

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<v Speaker 4>ask about the attacks and things like that.

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<v Speaker 1>That's what public policy is about.

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<v Speaker 4>You walk into this central square and you debate these

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<v Speaker 4>important things for three hundred and thirty million Americans. I've

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<v Speaker 4>worked over the years with Hillary Clinton on a number

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<v Speaker 4>of campaigns, and I remember Hillary saying once like, if

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<v Speaker 4>you're not willing to be attacked, you can't go into

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<v Speaker 4>the public square and debate policy. And so I think

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<v Speaker 4>it's part of our great democracy.

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<v Speaker 2>I look at who is inveighing against you and who's

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<v Speaker 2>throwing that invective, and it's the president elect, it's the

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<v Speaker 2>world's richest man.

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<v Speaker 3>Does it feel.

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<v Speaker 2>Different to you than what you, I'm sure experienced after

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<v Speaker 2>the Global Financial Crisis when you were at the CFTC

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<v Speaker 2>as the atmosphere. Has the environment changed for regulators like yourself, Well.

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<v Speaker 4>I think it does change. What we do here at

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<v Speaker 4>this great agency is look out for every day Americans,

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<v Speaker 4>people just trying to save for a better future, and

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<v Speaker 4>try to move through things that help them like we've done.

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<v Speaker 4>Like even shortening the settlement cycle from two days to

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<v Speaker 4>one day might sound geeky behind the scenes, but it

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<v Speaker 4>means you get your money one day faster, for instance,

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<v Speaker 4>or getting privacy notices there was no federal rule that

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<v Speaker 4>you needed to get a notice if your data was hacked.

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<v Speaker 4>Then we put in place some rules to do that.

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<v Speaker 4>So we're looking out for every day Americans, trying to

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<v Speaker 4>lower the cost of the markets to trade stocks, to

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<v Speaker 4>tarry de bonds. But it doesn't surprise me that then

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<v Speaker 4>there's some in the middle of the market. They're called brokers,

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<v Speaker 4>they're called dealers, they're called intermediary stock exchanges who they

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<v Speaker 4>like their business model. And if we're changing the rules

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<v Speaker 4>to benefit every day Americans, they might have thoughts on

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<v Speaker 4>that and object and that's part of the process. But

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<v Speaker 4>our clients, ultimately people at their kitchen tables.

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<v Speaker 3>Let me ask you about one facet of that. On

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<v Speaker 3>twenty million dollar, trillion dollar trillion, it's a big number

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<v Speaker 3>of tea with the T, and that's crypto.

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<v Speaker 2>And you've been you've offiable point out it's a small

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<v Speaker 2>sliver of that total multi trillion dollar package. But you

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<v Speaker 2>came into this job. You gave a big speech in

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<v Speaker 2>which you analogized the crypto world to the wild West.

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<v Speaker 2>I guess that makes you the sheriff. So as you

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<v Speaker 2>get ready to hang up your spurs, jeez, less of

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<v Speaker 2>a wild not really belaboring the metaphor, but is it

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<v Speaker 2>less of a wild West than it was?

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<v Speaker 4>As you leave this office, My daughters if they ever

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<v Speaker 4>watched this interview, well, we're your spurs, Dad. I think

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<v Speaker 4>that we've done some good things. Look, I came in.

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<v Speaker 4>My predecessor, Jake Clayton, who was in this office, had

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<v Speaker 4>also tried to dress this new emerging part of finance.

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<v Speaker 4>And as you say, it's less than one percent of

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<v Speaker 4>our overall financial markets. Uh, but it it was then

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<v Speaker 4>when Jay was trying to address it, and he brought

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<v Speaker 4>eighty enforcement actions in this area. We've brought in about

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<v Speaker 4>a hundred in our four years. It was consistent. It's

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<v Speaker 4>maybe about five percent of what we do in our

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<v Speaker 4>law enforcement. I means there's ninety five percent on f

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<v Speaker 4>in a sense unfortunately about other things you know, scammers

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<v Speaker 4>and fraudsters and so forth. But in this field, I

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<v Speaker 4>it's rife with bad actors. It's it's it's and let

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<v Speaker 4>me just split the field into two just for a minute.

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<v Speaker 4>The public knows a lot about bitcoin, which is uh,

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<v Speaker 4>depending upon its market value on any given day, is

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<v Speaker 4>two thirds to eighty percent of the market value of crypto,

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<v Speaker 4>and then there's a l everything else where some people

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<v Speaker 4>say bitcoin and ethereum.

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<v Speaker 1>And everything else.

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<v Speaker 4>These ten or fifteen thousand projects, they're raising money from

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<v Speaker 4>the public, and the public's investing, or they're just the

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<v Speaker 4>public's investing hoping for a better future. I've been around

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<v Speaker 4>finance for over four decades, and everything in the market's

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<v Speaker 4>trade on a mixture of fundamentals and sentiment at any

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<v Speaker 4>given time. I've never seen a field that's so much

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<v Speaker 4>wrapped up in sentiment and not so much about fundamentals.

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<v Speaker 4>And these ten thousand to fifteen thousand projects, many of

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<v Speaker 4>them will not survive. They're like venture capital investments. They're

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<v Speaker 4>not gonna survive. But they're also a fair number of

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<v Speaker 4>small pump and dump schemes and other things in this

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<v Speaker 4>And of course we've lived through a few years where

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<v Speaker 4>you know, they became notorious, but they're in jail. The

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<v Speaker 4>sambank and Freed's and the czs and the dough quons

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<v Speaker 4>uh where tens of billions of dollars were lost by investors.

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<v Speaker 2>Can I ask you about those, because early on, when

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<v Speaker 2>you talked about enforcement, you said bringing high profile.

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<v Speaker 3>Cases could lead to a change in in behavior.

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<v Speaker 2>Are Are you satisfied that those cases has led to

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<v Speaker 2>a change in behavior in in the space in in.

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<v Speaker 4>Particular, it's it's a field that built up around non compliance.

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<v Speaker 4>And I'm proud of what we've done of building on

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<v Speaker 4>what UH chair Clayton and others had done previously. I

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<v Speaker 4>think there's still work to be done, particularly I'm i'm

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<v Speaker 4>I'm saying about these ten or fifteen thousand alternative coins

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<v Speaker 4>that UH there and the intermediaries themselves. I think there's

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<v Speaker 4>still work to be done, and and I think the

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<v Speaker 4>public is probably aware of this, and less than ten

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<v Speaker 4>percent of the public invests in this field. I think

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<v Speaker 4>there is feder reserve and even we've did a survey

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<v Speaker 4>here these public figures, it's somewhere between seven and nine

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<v Speaker 4>percent of the public should be aware of these are

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<v Speaker 4>highly speculative, volatile investments, and they're not getting the full

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<v Speaker 4>and fair disclosure that's appropriate. What we're about here at

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<v Speaker 4>the Securities and Exchange Commission for ninety years is letting

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<v Speaker 4>the public decide what they want to invest in, and

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<v Speaker 4>secondly that the intermediaries, the brokers, the stock exchanges, the

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<v Speaker 4>advisors are giving that advice and doing what they're doing

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<v Speaker 4>without fraud and manipulation and so forth.

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<v Speaker 2>Settle something for me, because I think when you came

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<v Speaker 2>into office, a lot of people looked at your immediate background,

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<v Speaker 2>having researched a lot of digital assets, worked on them

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<v Speaker 2>at mit, that you would be perhaps a champion of them.

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<v Speaker 2>Has there been an evolution in the way that you

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<v Speaker 2>approach crypto over that transition from academia to hear or

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<v Speaker 2>while you've been people think you are somebody who's adamantly opposed.

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<v Speaker 1>To here's the evolution.

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<v Speaker 4>When you're in academia or when you're not in this job,

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<v Speaker 4>you can study something and observe it as I did,

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<v Speaker 4>and try to teach students what's the value proposition about

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<v Speaker 4>this new technology, what's the value proposition of this new

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<v Speaker 4>investment vehicles? But then when you're in this job, this

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<v Speaker 4>is a chair of a five member commission or roughly

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<v Speaker 4>five thousand people. That's a law enforcement agency. And so

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<v Speaker 4>now one gets in this chair building upon my predecessor

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<v Speaker 4>had brought eighty cases, so we brought about one hundred.

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<v Speaker 4>And this is a field rife with challenges and non

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<v Speaker 4>compliance with the securities laws. So sometimes people you know,

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<v Speaker 4>you take an oath of office. You do what you

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<v Speaker 4>can to protect the investing public.

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<v Speaker 3>Just another question about evolution of thinking.

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<v Speaker 1>UH.

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<v Speaker 2>Turning to the the climate related rules that have been

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<v Speaker 2>passed by by the SEC, some say that you fashioned

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<v Speaker 2>yourself as kind of a climate crusader.

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<v Speaker 1>Now are they?

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<v Speaker 3>Are they wrong in that in that supposition?

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<v Speaker 1>I haven't heard that.

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<v Speaker 4>I'm a securities I I I was in Culman Sachs

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<v Speaker 4>for eighteen years of fair a number of years ago now,

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<v Speaker 4>and I deeply believe in markets, and I came into

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<v Speaker 4>a role that there were some outsiders that said, use

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<v Speaker 4>the securities laws to promote a an agenda. But we're

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<v Speaker 4>just a securities regulator.

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<v Speaker 1>And and I deeply believe that.

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<v Speaker 4>But what we found is that not just hundreds, but

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<v Speaker 4>over a thousand companies were already making disclosures to their

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<v Speaker 4>investors about climate risks. And I'm very proud of the

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<v Speaker 4>work we did to bring some consistency in those UH.

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<v Speaker 4>Disclosures all based in materiality, meaning that the only thing

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<v Speaker 4>that the.

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<v Speaker 1>Various investors need to.

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<v Speaker 4>Look to, or would would I'm sorry, the only thing

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<v Speaker 4>the public companies would need to do is to make

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<v Speaker 4>disclosures about their material greenhouse gas emissions and not their

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<v Speaker 4>supply chain, just their emissions and how they manage certain

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<v Speaker 4>risk in that field.

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<v Speaker 1>Uh.

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<v Speaker 4>One interesting number of the top thousand companies in the

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<v Speaker 4>US and the capital markets, what percentage of them do

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<v Speaker 4>you think already make greenhouse guests disclosures.

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<v Speaker 3>No, it is the majority, it's over.

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<v Speaker 4>Sixty percent, and so so investors. We heard from not

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<v Speaker 4>just hundreds, but thousands of investors that say they make

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<v Speaker 4>decisions over their A material disclosures.

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<v Speaker 1>So our role is just to try to bring some

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<v Speaker 1>consistency to that.

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<v Speaker 2>Chick Gant and I are going to keep talking. The

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<v Speaker 2>full interview will be available on The Big Take podcast