Ex-SEC chair Jay Clayton says agency is having ‘blunt conversations’ on crypto; endorses ‘true stablecoins’

Jay Clayton, former chair of the U.S. SEC, commented on the agency’s current treatment of crypto in a conversation at Bloomberg Invest on June 8.

Beginning on June 5, the U.S. Security and Exchange Commission filed charges against Binance and Coinbase. Bloomberg’s Carol Massar asked Clayton whether he would have taken the same actions as current SEC chair Gary Gensler.

Clayton responded by stating:

“Look, it’s [Gensler’s] leadership now. He’s been in this position for over two years. … I’m not going to be the person who throws bombs or second-guesses from the sidelines.”

Clayton said he supports the SEC and noted that during his tenure, he was known for being a “crypto hawk” who shut down the “ICO craze.” That trend took place in the first half of 2018, when initial coin offerings (ICOs) raised a record-breaking $7 billion. Around that time, Clayton declared that ICOs should be regulated as securities.

SEC’s ‘blunt conversations’

Clayton told Bloomberg that blockchain, as new technology, was expected to reform old regulations. But in practice, early blockchain technology broke down investor protections — something that should not have happened, he said.

Despite his past attempts to regulate the industry, Clayton said regulators are now having “very blunt conversations” around blockchain and cryptocurrency, noting that it is something that “requires nuance” and applications of blockchain in the financial system “should not be controversial.”

“True stablecoins”

Clayton then expressed support for what he called true stablecoins, stating:

“I am remarkably impressed by the functionality of true … stablecoins. Not the algorithmic stablecoin, not the liquidity transformation stablecoin, but a true [stablecoin] backed by the same thing that we back bank accounts by.”

He said stablecoins are a “remarkable technology” for international retail transfers of value. He suggested that, compared to paper currency, stablecoins provide a far greater capacity for compliance with KYC/AML regulation.

Clayton did not indicate which stablecoins might qualify. 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.

Clayton otherwise expressed support for tokenization of assets and noted that other countries are engaged in blockchain-based issuance of sovereign debt.

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