GENSLER WARNS AGAIN ON CRYPTO RISKS

Even after cryptocurrency prices crashed earlier this month, more investors still may be lured to, and harmed by, the volatile asset, Gary Gensler, chair of the U.S. Securities and Exchange Commission, warned in comments to reporters last week after a Congressional hearing.

“I think a lot of these tokens will fail,” he said.

“I fear there’s a lot of people going to be hurt and that will undermine some of the confidence and trust in markets writ large,” he added.

Bitcoin and other cryptocurrencies have erased $1 trillion in investors’ worth in the last six months, with the flight accelerating earlier this month as the U.S. Federal Reserve raised interest rates again, driving investors out of risky assets.

Gensler has long warned of crypto’s dangers, as we reported in “SEC Chief Sets Regulatory Sights on Cryptocurrencies” (10 Aug 2021), “Gensler: Crypto Not Viable Long-Term” (28 Sep 2021), and “SEC Push to Regulate Crypto” (7 Dec 2021) .

Some now share Gensler’s fear that crypto’s crash will taint other markets.

There may be “a knock-on effect on traditional markets and traditional assets” if digital coins continue to spiral downward, Rostin Benham, chair of the U.S. Commodity Futures Trading Commission, said in 16 May a public statement.

TRENDPOST:  Some crypto projects are built to solve real world problems and develop use cases much like traditional software, while using innovations of crypto regarding decentralization and reward mechanisms.

Many other crypto projects have little in the way of utility to recommend them. 

Investors should always do their homework regarding specific investments. 

Governments and even large tech corporations did not create many of the innovations of cryptos.  Late to the party, they are trying variously to suppress the sector, or co-opt it.  That’s the story of the rush to CBDCs and the movement of corporations like Facebook and Square to focus in various ways on the “Web3” vision introduced by crypto innovation.

It would be a mistake for governments to crush these innovations of the crypto sector, because the values and efficiencies of utility driven projects are significant (For more on that, see “THE CRYPTO ‘AGE OF UTILITY’ HAS JUST BEGUN” and “NFTS: MUCH MORE THAN DIGITAL ART”).   

To some extent, crypto innovation will flow to regions most open to, and having the most to gain from the technology.  For more on that, see the story in this section, “CBDC OUT TO PRESERVE STATUS QUO FOR HAVE AND HAVE NOT COUNTRIES, SAYS NEW STUDY.”