The Complex Motives of Gary Gensler: Unveiling the Conflicting Stance on Cryptocurrency Regulation
The regulatory environment in the United States around cryptocurrency is extremely unclear. I’m not the only one saying it. Coinbase, Robinhood, and Kraken executives all share the same sentiment, yet the SEC continues to illogically pursue charges and court cases around different crypto protocols.
In this article, I want to specifically focus on Gary Gensler and his motives. I believe there are great people at the SEC to work with, including Hester Pearce, who continues to show her adaptable nature toward creating an innovative, efficient, and fair financial market in the United States.
There’s a lot that could be discussed regarding this subject, but Gary Gensler stands out as being unique and especially punitive. Let’s understand why the Chair of the SEC is attempting to destroy an entire industry with the waving of a wand.
Let’s start with understanding the basic premise that he is attempting to gain promotion to the Treasury Department or Federal Reserve the two most powerful voices in all of American economics. Interestingly, neither position is elected.
Here is a list of things the Treasury Department is responsible for:
Producing all currency and coinage of the U.S.
Collecting taxes, duties, and money paid to and due to the U.S.
Paying all bills of the U.S.
Managing government accounts and the United States public debt.
Supervising national banks and thrift institutions.
Advising on domestic and international financial, monetary, economic, trade, and tax policy
Enforcing federal finance and tax laws.
Investigating and prosecuting tax evaders.
After you leave the Treasury Secretary position, you’ll have a comfy position in a private company, usually a bank, that will pay you enough to feed an entire country. That’s the goal and that’s the goal of Gary Gensler.
Before we discuss some of the events that unfolded during Gensler’s term as the Chair of the SEC, we need to look at the jobs he held before he was appointed.
His first professional job was with Goldman Sachs in 1979 where he served 18 years and worked his way up through the corporate ladder to eventually become a partner at the firm. After this position, he was nominated by Bill Clinton to serve as the Assistance Secretary of the Treasury in 1997 and worked with the Treasury in some capacity until 2001, never being the Secretary of the Treasury, however.
He always worked in regulation. He worked with Paul Sarbanes to assist with the writing of the Sarbanes-Oxley Act and his next major job was being appointed to the head of the Commodity Futures Trading Commission (CFTC) right after the Great Recession where he worked to create frameworks for the $400,000,000,000,000 derivatives market that was a key player in the financial collapse.
Gensler always fought for stringent regulation and was known for being fiery and never being satisfied with the rules that were passed because he felt they didn’t go far enough.
Before Gensler joined the SEC, he taught blockchain classes. There actually exists a library of the classes he taught at MIT on YouTube. I watched all of them a while ago and gave my analysis in this article.
In that article, I stated he seemed to have a positive outlook on Crypto, but I was still cautious based on some of his comments. Regardless, the idea that he taught a blockchain course at one of the most prestigious institutions in the world tells you he knows enough about the industry to form an educated opinion. However, his opinions as of recently don’t seem to be very educated.
In November 2020, Gensler was appointed to the Chair of the SEC by President Joe Biden.
This was great for Gensler, he was increasing his personal brand and gaining the attention necessary to be nominated for the Treasury Secretary, the Fed, or even gaining enough support to get a presidential bid down the line.
This is where things start to get interesting for our story. The Chair of the SEC has tremendous power and can sway markets depending on their views.
Less than a year after being the chair of the SEC, Gensler turned his attention toward crypto, but he did it in a negative light. The first major message he pushed occurred when he testified in front of a Senate committee that crypto was the ‘Wildwest’ and Congress needed to increase the funding and staffing of the SEC to bring the industry into compliance. At the time, and still today the laws surrounding cryptocurrency are unclear, even more of a question is how they should be regulated. While Gensler was in power as the head of the SEC, he felt he was in charge of making the decisions and took it upon himself to push crypto in a negative light on the general public, despite not having the authority to properly regulate it.
While he was doing this, Gensler would go back and forth regarding his view. He thought it was a crazy industry, yet he didn’t have any plans on regulating or banning any cryptos. He thought the CFTC should govern over some of the assets, yet wanted to have all of the power as chair of the SEC. He didn’t want to ban any cryptos, but he wouldn’t approve a Bitcoin ETF either.
The back and forth of his attitude made it even more confusing for the market participants as to how they should approach a market with such unclear regulation from the world’s largest country.
Meanwhile, crypto was experiencing the largest bull market in its history with prices hitting new all-time highs what felt like every day. During this bull run, there were numerous scams that went unchecked by the SEC. All of these unchecked, unregulated, and centralized scams weren’t immediately obvious to users or the market, and in 2022 the entire system nearly collapse upon itself with the worse financial fraud in history occurring.
All right under the nose of an SEC Chair that is seeking a promotion and to legitimize his legacy.
These scams included: 3 Arrows Capital, the Terra USD/LUNA collapse perpetrated by Do Kwon, Voyager filed for bankruptcy, Celsius declared bankruptcy, BlockFi filed for bankruptcy, and perhaps worse of all the FTX fraud committed by SBF.
How embarrassing, how debilitating. How could something like this happen right under the nose of the MIT professor, the previous CFTC Chair, and the Frankel Fiduciary Prize winner for his work on financial regulatory reform?
Now? In 2023, Gensler is on a revenge tour toward the cryptocurrency industry. In his mind, if he is remembered for a failure to regulate the cryptocurrency industry, then his career work would be worth nothing. He understood that in 2023, he needed to take a harsh stance on crypto to change the perception of the public from someone that let all of this happen to someone that got regulation through, that way he could look to cement his legacy into history by earning a position at the Treasury, Fed, or become a President.
Hence the court cases with Binance and Coinbase, it occupies the mind space of the normal citizen when they fail to take the time to analyze the real motives behind the person pushing regulation by enforcement.
But let’s dig deeper into the FTX collapse and how Gary was related and how embarrassing it would be if the news broke to the masses and if party lines didn’t determine your support for politicians regardless if they are corrupt. A tweet by Tom Emmer in November of 2022 sparked a lot of interest in the relationship between Gensler, the chair of the SEC, and SBF, the owner of FTX.
What did he mean? Well, journalists and investigators took a deeper look and saw that Gary Gensler’s boss when he was a professor at MIT, Glenn Ellison, was the father of Caroline Ellison, the Co-CEO of Alameda Research, which was FTX’s research arm. The connections go further, FTX and Gensler shared lawyers, SPF and Gensler met regularly to discuss crypto legislation and were even nearing passing some groundbreaking legislation that was controversial for the industry as it make it difficult for new entrants in the market.
By all accounts, it appears as if Gensler was colluding with SBF to pass crypto legislation that would both bolster Gensler’s popularity in Washington and allow SBF to take the throne of crypto exchanges by being the ones writing the laws that were nearly passed and create a regulatory monopoly.
When the news broke, SBF was dismantled, yet Gensler was able to remain in his position. Why? Because of his liberal political affiliation and the corrupt politicians in office that supported him. Imagine how bad it would look on the Democratic Party if their SEC Chair had to be fired because he wasn’t smart enough to catch the scams that everyone already knew about. How would that reflect on them more broadly? That’s how decision-making is done in Washington, not what’s best for the voter. Gensler is on a career journey and using an industry made up of millions of people to propel him to the next level.
2023 is essentially the contract year for Gensler. As elections roam closer it becomes more of an urgent issue for Gensler to prove his worth. If Republicans were to win the presidential election, I imagine one of their first moves would be to kick the current SEC Chair out of office.
Continuing along the timeline, only weeks after Gensler decided to take Binance and Coinbase to court by stating they are an unregulated exchange, Blackrock, Fidelity, and some of the world's largest broker-dealers and money managers in the world are applying for Bitcoin ETFs, putting additional pressure on the SEC and Chair Gensler to act in favor of the crypto markets.
We must continue to put pressure on the agency and our congresspeople to force action that will benefit the industry. The technology is too good to not share with the world and we live in a situation where incumbents will do anything in their power to prevent losing their throne. We as an industry must take on that same resilient strategy and be willing to do anything to ensure our industry stays relevant and growing.
In conclusion, Gary Gensler’s influence as the SEC Chair appears to be colored by a multi-layered tapestry of previous experience, alleged personal agenda, and a complex web of relationships that run deep into the crypto industry. This has led to a seemingly contradictory stance towards crypto, where the industry is criticized and even prosecuted, while at the same time, prominent traditional financial institutions are making moves to embrace it.
Despite the daunting challenges and potential for harsh regulations, the resilience of the crypto industry has been apparent. Traditional financial giants like Blackrock and Fidelity applying for Bitcoin ETF applications, even amid the prevailing uncertainty, is a testament to the promise and potential of this burgeoning industry.
The responsibility falls on the regulators to create a transparent, efficient, and fair crypto regulatory environment. Gensler’s current approach is causing concern and confusion in the market and is potentially hindering innovation in a field that has the potential to revolutionize finance.
