Jay Clayton, former chair of the US Securities and Exchange Commission (SEC), has given his thoughts on the agency’s current approach to cryptocurrency regulation. Speaking at Bloomberg Invest on June 8, Clayton commented on recent charges filed by the SEC against Binance and Coinbase, which began on June 5. When asked if he would have taken the same actions as current SEC chair Gary Gensler, Clayton declined to comment, stating that Gensler is now in charge and he won’t second-guess him. However, Clayton did express his support for the SEC, noting that during his tenure, he was known for being a “crypto hawk” who shut down the initial coin offering (ICO) craze in 2018.

Clayton explained that blockchain technology was initially expected to reform old regulations, but in practice, it broke down investor protections, which was unexpected. Despite his past attempts to regulate the industry, Clayton said regulators are now having “very blunt conversations” about blockchain and cryptocurrency. He added that blockchain technology requires nuance and its applications in the financial system should not be controversial.

Clayton expressed support for what he called “true stablecoins,” which he defined as stablecoins backed by the same thing that backs bank accounts. He said that stablecoins are a “remarkable technology” for international retail transfers of value, providing greater capacity for compliance with know your customer (KYC) and anti-money laundering (AML) regulation compared to paper currency. Clayton did not indicate which stablecoins might qualify, but he was impressed by the functionality of true stablecoins.

Clayton also expressed his support for the tokenization of assets and noted that other countries are engaged in blockchain-based issuance of sovereign debt. His co-panelist, Dan Morehead of Pantera Capital, suggested that USDC proved its backing by recovering from a depeg after Silicon Valley Bank’s collapse in March. Clayton did not dispute that point.

In summary, Clayton expressed his support for the SEC and its current approach to crypto regulation. He acknowledged the need for nuance in regulating blockchain technology and noted the benefits of stablecoins for international retail transfers of value. He also expressed his support for the tokenization of assets and acknowledged other countries’ issuance of sovereign debt on the blockchain.

Regulation

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