Gary Gensler, who is the Chairman of the US Securities and Exchange Commission (SEC), has a background in teaching blockchain alongside leading high-profile legal cases between the SEC and various cryptocurrency financial firms. It begs the question: who is he and how did he come to be involved in the world of crypto?
Who is Gary Gensler?
Gary Gensler currently holds the position of Chair of the Securities and Exchange Commission (SEC) in the United States. He was appointed to the role by President Joe Biden in April 2021.
Born on October 18, 1957 in Baltimore, Maryland, United States, Gary Gensler graduated from the Wharton School at the University of Pennsylvania with a Bachelor’s degree in Economics.
From 1979 to 1997, the individual initiated their professional journey at the Federal Reserve and Goldman Sachs Investment Bank.
During the period from 1997 to 2001, Gary Gensler was appointed by President Bill Clinton as the Deputy Chairman of the Commodity Futures Trading Commission (CFTC). While serving in this position, Gensler became exposed to and developed an interest in emerging financial technologies, particularly blockchain and cryptocurrencies.
Having departed from CFTC in 2014, Gensler assumed the position of professor at MIT Sloan School of Management, delivering courses related to blockchain and cryptocurrency.
Gary Gensler – “The Villain’s Past” in Crypto
Formerly a Professor at MIT, teaching about Blockchain
Following his departure from the Commodity Futures Trading Commission (CFTC) in 2014, Gary Gensler entered into the field of blockchain education. He subsequently became a Professor at the prestigious MIT Sloan School of Management, offering his expertise and knowledge on the subject matter.
During a lecture on “Blockchain and Money” at MIT, Gensler stated in 2018 that…
We are aware that in the United States and several other jurisdictions, around three quarters of the market (with BTC and ETH accounting for approximately three quarters of the market share) are not ICOs (Initial Coin Offerings) or considered securities, even in the jurisdictions of the United States, Canada and Taiwan, which have similar conditions to the Howey Test we have previously discussed.
Approximately three-fourths of the market is not related to the stock exchange, rather it functions merely as a commodity, essentially a digitalized version of currency.
At present, he opines that the market share of BTC and ETH constitutes approximately three-fourths of the market and that these assets cannot be categorised as securities.
The Howey Test serves as an examination that aids the SEC in identifying any assets or activities that are linked to securities. In the event that these are indeed securities, they must adhere to the regulations set forth by the SEC.
Gary Gensler has been consistently suppressing cryptocurrency companies in the United States since assuming the position of SEC chairman
Upon confirmation as Chairman of the SEC, Gary Gensler proffered several viewpoints and proposals pertaining to cryptocurrencies and financial markets. Notably, he reiterated the necessity of enhancing the SEC’s workforce to effectively tackle issues related to digital assets and other forms of virtual currencies.
During his speech at the Piper Sandler Global Exchange & Fintech Conference on June 8, 2023, Gensler drew a comparison between the present-day cryptocurrency market and the US stock market of the 1920s, characterizing the former as rife with fraudsters, scammers, and Ponzi schemes.
The speaker emphasized that just as the National Assembly has “cleaned up” the securities market by enacting securities laws, the SEC could also clean up the cryptocurrency market by applying these laws to “crypto asset securities.”
During Gensler’s tenure as head of the SEC, he consistently targeted crypto companies and caused them to suffer significant losses through repeated attacks.
- The lawsuit between the SEC and Ripple Labs: The legal dispute initiated in December 2020, which was subsequently intensified by Gensler upon his assumption of power, has triggered a great deal of controversy and led to a continuous decline in the value of XRP.
- Fines against crypto finance company BlockFi: In February 2022, the Securities and Exchange Commission (SEC) imposed a fine of up to $100 million on BlockFi for violating securities regulations related to lending and deposit activities.
- SEC accuses Coinbase of listing securities: The Securities and Exchange Commission (SEC) has filed a complaint against a senior employee of Coinbase, alleging that the company violated securities regulations by listing securities-like assets without complying with the regulations. In March 2023, the SEC targeted Coinbase as a warning shot to the entire crypto market.
- SEC fines Kraken exchange: In February 2023, Kraken was assessed a penalty of 30 million USD by SEC for violating securities regulations related to the sale of security contracts.
- SEC warns Binance’s BUSD stablecoin: In February 2023, the SEC issued a warning to BUSD, stating that it was an unregistered security, and required Binance to comply with securities regulations. This action resulted in over 100 billion USD worth of stablecoin coming under pressure.
- SEC sues cryptocurrency exchange Bittrex: In April 2023, the SEC filed a lawsuit against Bittrex exchange for allegedly listing securities-like assets without proper registration.
- SEC sues Binance US: In June of 2023, Binance US and CEO Changpeng Zhao were accused by the SEC of contravening securities regulations.
The primary cause for these lawsuits is the unauthorized listing of securities-like assets without registration. These legal disputes have had a significant impact on related cryptocurrency companies and the overall cryptocurrency market.
The aforementioned elucidates Gary Gensler’s objective to enhance regulation and compliance within the industry. Nevertheless, the SEC’s regulations are increasingly excessive, leading to considerable discontentment.
It is worth noting that BTC and ETH are two major cryptocurrencies that have not yet been scrutinized by regulatory bodies. The SEC is currently exerting significant efforts to suppress the crypto market by declaring a series of tokens, including BNB, BUSD, SOL, as securities. As a result, the question arises as to when BTC and ETH will be subject to the same scrutiny.
The controversy surrounding Gary Gensler is the subject of discussion
Conflicting statements about BTC and ETH
Prior to assuming the role of Chairman of the SEC, Mr. Gensler held the belief that Bitcoin (BTC) and Ether (ETH) – encompassing three-fourths of the cryptocurrency market share – did not classify as securities.
However, subsequent to assuming the Chairmanship of the SEC, he forthrightly criticized the cryptocurrency market employing strong language.
Gensler emphasizes that certain forms of cryptocurrency, such as Bitcoin and Ethereum, can be considered securities and are therefore subject to the regulations and protocols of traditional securities markets.
The individual presented an argument suggesting that categorizing these types of digital currencies as securities would offer users with a higher level of protection, ensuring transparency and accountability in the trading and distribution of digital currencies.
During a congressional hearing on April 18, 2023 before the US House of Representatives, Gary Gensler was unable to provide a clear answer when asked by Congressman Patrick McHenry whether ETH should be classified as a commodity or security.
It can be observed that Gensler’s stance on the issue of whether BTC and ETH classify as securities or not exhibits a complete reversal both prior to and subsequent to assuming the position of Chairman of the SEC.
SEC sued Coinbase for violation, Coinbase countersued SEC for not providing clear rules
In March 2023, the SEC accused Coinbase of violating securities laws. In early April 2023, Coinbase counter-sued the SEC for failing to provide clear positions and legal guidelines on assets recognized as securities. This can be likened to a situation where a person receives a speeding ticket without clear knowledge of what the maximum speed limit is.
Following Coinbase’s request for legal action, the US Court received their petition and subsequently requested a clarification from the Securities and Exchange Commission (SEC). In response, the SEC stated that they are not obliged to provide any information to Coinbase.
During the trial, the United States Court demanded that the Securities and Exchange Commission (SEC) reaffirm their stance on the proposal to develop a legal framework for crypto assets traded on the Coinbase exchange. The SEC has been granted a period of seven days to respond to Coinbase’s lawsuit and must provide justification for their decisions along with an anticipated timeline for resolution.
According to documents submitted to the court by SEC at the beginning of May 2023, SEC asserted that it was not obligated to comply with the requests made by Coinbase in the lawsuit and that the regulatory concerns raised by Coinbase were unfounded. In fact, SEC went so far as to request that the court dismiss Coinbase’s claim.
The Securities Law and the Administrative Procedure Act (APA) do not impose an obligation on the U.S. Securities and Exchange Commission (SEC) to issue new regulations related to digital assets that Coinbase demands.
SEC Responds to Coinbase’s Complaint
This indicates non-cooperation on the part of the SEC in elucidating the legal framework regarding securities as asset classes.
However, when Gary Gensler assumed the position of Chairman of the SEC, he made the following statement:
It is a widely known fact that registering on our website entails completion of a simple form which is accessible to all. Our personnel are readily available for any enquiries on the matter.
According to Paul Grewal, the General Counsel of Coinbase, they had reportedly met the representatives from the concerned agency over 30 times within a span of 9 months prior to being sued by Coinbase. However, most of their proposals were left unaddressed.
Coinbase has requested the SEC to specify the particular assets on its platform which they believe to be securities, yet the SEC has declined to fulfill such a request.
Paul Grewal, Chief Legal Officer of Coinbase
Under the leadership of Gary Gensler, the Securities and Exchange Commission (SEC) is exhibiting poor communication and action, which inadvertently leads to a dead end for the crypto industry in the United States. Consequently, these companies are compelled to seek new markets such as China for further development.
Has Gary Gensler ever proposed serving as an advisor to Binance?
During the legal dispute between the SEC and Binance US, the legal team of Binance made arguments on two separate occasions – in early February 2023 and again on June 4, 2023 – asserting that Gary Gensler should withdraw from the case due to his prior interactions with Binance and its CEO, Changpeng Zhao (CZ).
Binance has stated that in March 2019, Gary Gensler had proposed to work as an advisor for the exchange before being appointed as the Chairman of the SEC by the government. During their lunch meeting in Japan in March 2019, Gensler had discussed BNB and Binance US with CZ. Subsequently, CZ was interviewed for a cryptocurrency course at MIT by Gensler. Furthermore, the two parties are still in contact.
Binance has confirmed that prior to appearing before the House Financial Services Committee, Gary Gensler sent a copy of his testimony to CZ.
Binance refuted Gary Gensler’s involvement in the lawsuit by utilizing the aforementioned justifications.
The specific motor driving the SEC’s litigation against Binance is uncertain; nonetheless, a certain ambiguity is discernible in the actions of SEC Chairman Gary Gensler himself.
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