The cryptocurrency industry is "filled with scams, charlatans and fraudsters," he told BBC-in one of the main financial regulators of the United States.
The chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, says that "investors around the world have lost a lot of money" due to cryptocurrency companies not following the laws that his agency tries to enforce.
This comes as the industry is spending millions of dollars on political donations, trying to influence the outcome of the November election in the US, in the hope of more favorable laws in the future, reports the Telegraph.
In addition to the presidential battle between Donald Trump and Kamala Harris, all 435 House districts are up for re-election, as well as 33 of the 100 Senate seats.
The future of cryptocurrencies, one of the most debated technologies in the world, is an issue where there appears to be a clear dividing line between Donald Trump and the current administration of President Joe Biden.
Trump has sought to attract the votes of cryptocurrency enthusiasts by promising to make America the "cryptocurrency capital of the planet" and to create a "strategic national Bitcoin reserve," similar to the US government's gold reserves.
Last week, he introduced a new cryptocurrency platform called World Liberty Financial. Although he gave few details, he stated that "I think cryptocurrency is one of those things that we need to fix."
This is a big change from three years ago, when he disparaged Bitcoin as something that "looks like a scam" and a threat to the US dollar.
Trump's new enthusiasm is in stark contrast to the Biden administration, in which Harris is vice president. The White House has led a crackdown on cryptocurrency companies in recent years.
In March, Sam Bankman-Fried, the founder and director of FTX, was sentenced to 25 years in prison for fraud after stealing billions of dollars from customers around the world, many of whom are still trying to recover their money.
Meanwhile, in April, the founder of the world's largest cryptocurrency exchange, Binance's Changpeng Zhao, was sentenced to four months in prison and the company paid a $4.3 billion (€4.1 billion) fine. He admitted to allowing criminals, child abusers and terrorists to launder money on his platform in a case brought by the US Department of Justice.
"This is an area that has come to the fore, and just because they're recording their cryptocurrency assets on a new ledger, they [mistakenly] say 'we don't think we want to comply with time-tested laws,'" he says Gensler.
He explains that rules that compel companies that want to raise money from the public to "share certain information" with them have been in place to protect investors since the SEC was created.
This happened in 1934, after the infamous Wall Street crash of 1929 that heralded the Great Depression.
"Cryptocurrency is only a small part of capital markets in the US and around the world, but it can undermine the confidence that everyday investors have in the capital markets," says Gensler.
While supporters argue that cryptocurrency offers a fast, cheap and secure way to transfer funds, a survey by the US central bank, the Federal Reserve, found that the number of Americans using it has dropped from 12 percent to in 2021 to 7 percent last year.
Harris hasn't talked much about cryptocurrencies, but one of her advisers said last month that she would "support policies that ensure emerging technologies, and this industry, continue to grow."
Recent meetings between her team and industry leaders have been aimed at building trust and giving hope for a brighter future for cryptocurrency leaders, regardless of who wins in November.
"I can't stress enough how important this is, not just for the US, but for the world," according to Paul Grewal, who is the director of legal affairs at cryptocurrency firm Coinbase. He has been to these meetings.
“Not only is the US an important market for cryptocurrency, but so much of the important technology surrounding it was developed here. And I think it's also crucial not to lose sight of the fact that the rest of the world is not just waiting for the US to fix its situation," added Grewal.
He adds that, considering how close the race for the White House is, "every vote will count, and cryptocurrency votes are no exception."
The blow to cryptocurrencies in the US this year has also been mirrored in Europe. In April, the European Union agreed new laws to try to reduce the risk of criminals using cryptocurrencies.
However, other regulators are moving more slowly. The G20 group of major economies is working on minimum standards for cryptocurrencies, but they are not legally binding and implementation has been slow.
In the US, a bill to regulate cryptocurrencies has passed the House of Representatives, but not the Senate. Critics argue that it will offer fewer protections for consumers.
Paul Grewal of Coinbase supports the bill and says that “this is not an industry that is avoiding regulation.” He adds that the sector simply wants the same standards to be applied to cryptocurrencies as to other assets, “not tougher, but not weaker.”
With November's US election on the horizon, the cryptocurrency industry has sensed an opportunity to help elect lawmakers who take a more business-friendly view.
By last month, the sector had already spent a record $119 million on donations, according to research by the nonprofit Public Citizen.
The consumer advocacy organization's director of research, Rick Claypool, says the money is being used "to help elect pro-cryptocurrency candidates and to attack cryptocurrency critics, regardless of political affiliation."
They have spent more than any other industry in terms of corporate donations because they are "trying to discipline the US Congress into giving in to their demands for less oversight and weakening consumer protections," he adds. /Telegraph/
