When Securities and Exchange Commission (SEC) Chairman Gary Gensler took up his current position back in April, the crypto industry expected a change in the federal agency’s stance—which was hostile during his predecessor’s tenure—toward cryptocurrencies and digital assets. He has disappointed them.

Not only has Gensler outlined new concerns and called the industry “a Wild West”—he has also used every available opportunity to press his case for bringing the industry under his agency’s oversight. In his testimony before the Senate Banking Committee on Tuesday, the SEC chief again reiterated those issues and made the case for bringing the recalcitrant industry under his watch.

A Critical Assessment

Most of Gensler’s assessments about the state of affairs in the cryptocurrency industry were negative. According to the SEC chief, only a “small number” of cryptocurrencies currently trading in crypto markets are not securities. “Very many are,” Gensler said. This includes stablecoins, a type of cryptocurrency whose price is pegged to a fiat currency or a basket of assets to minimize price fluctuations.

When asked for his reasoning to categorize stablecoins as securities, Gensler pointed to the “35 different things” defined as securities in the 1933 Securities Act. While the cryptocurrency industry is fixated on the Howey Test as outlined in a Supreme Court verdict to define securities, the Act actually defines securities in multiple guises including investment contracts, collateral-trust deposit, and certificates of deposit.

Decentralized Finance or DeFi tokens and services have exploded in popularity this year. But Gensler said that the services are decentralized in name only and that user agreements for such services mask additional fees and charges that are not obvious to the customer. He said DeFi and crypto tokens are a “highly speculative asset class” and agreed with Senator Elizabeth Warren, Democrat of Massachusetts, that high and unpredictable fees at DeFi services could “make crypto dangerous.”   

During the hearing, Gensler also took aim at Coinbase, North America’s biggest cryptocurrency exchange by trading volume. Coinbase Global, Inc.’s (COIN) CEO Brian Armstrong had accused the SEC last week of “really sketchy behavior” for refusing to divulge their reasons for categorizing tokens in their lending product as securities. He had also said the agency is “creating an unfair market” by threatening to sue crypto exchanges.

Gensler said the exchange “may have dozens of tokens that are securities” in its trading markets. “But they [Coinbase] are not registered with the SEC,” he added, meaning Coinbase is not subject to the same disclosure regime as other trading exchanges registered with the agency.  

Despite his unrelenting criticism of the crypto industry, Gensler clarified that he was not “negative or minimalist” about cryptocurrencies. “I fear that if the field, which I studied for 3.5 years at MIT, stays outside the public policy framework for Anti-Money Laundering (AML), investors protection, and tax fraud … it is not going to persist,” he said.

More Funding and Coordination Needed

Even as he made the case for greater crypto oversight, Gensler also asked for more funding for his agency. He has come to the agency at a critical time in its existence. Technology has made previous rules for capital market formation inadequate, and the emergence of meme stock traders has upended investor protection. According to Gensler, his agency is currently working on 6,000 projects and is short-staffed. “Funding-wise, we could use a lot more people,” he said.

With regards to cryptocurrencies, better coordination between market regulators is required, he said. For example, establishing a regulatory framework for stablecoins could require his agency to coordinate their efforts with banking agencies. “And then, there are some in the weeds things, like infrastructure and custody [for digital assets], that I think we can work with Congress to clarify,” Gensler said.