Gary Gensler’s Complicated Cryptocurrency Legacy — And the Future Implications

Gary Gensler’s tenure as chair of the Securities and Exchange Commission is approaching a tumultuous and premature conclusion.

He faced considerable opposition within the crypto sector — leading a regulatory body that initiated numerous lawsuits and enforcement actions against U.S. companies.

A former lecturer on digital assets and blockchain at MIT, Gensler painted much of this industry with a broad brush — labeling it a “Wild West” filled with fraud.

The appointee of the Biden administration was frequently accused of overstepping his bounds, with several contentious SEC regulations being overturned by the courts.

Gensler was slow to approve exchange-traded funds based on Bitcoin’s spot price — consistently postponing decisions on applications from firms like BlackRock.

However, the commission faced a significant setback when an appeals court determined it had not provided adequate justification for rejecting an ETF proposal submitted by Grayscale.

A prevalent critique of the SEC during Gary Gensler’s leadership focused on its strategy of “regulation by enforcement” — a tactic that frustrated crypto exchanges.

Coinbase expressed outrage when it received a Wells notice in April 2023, pledging to vigorously contest the accusation of listing securities on its trading platform.

The centralized exchange had been authorized to list on the stock market, following an extensive six-month review process, back in 2021.

However, executives asserted that the Wells notice targeted “the very aspects of our business” that had been the subject of “detailed discussions” during the IPO process.

While Coinbase had proposed two distinct methods for registering with the SEC, the company stated it received no response — and expressed frustration at the time:

“Regulatory uncertainty in the crypto industry is getting worse. Instead of developing a regulatory framework for crypto, the SEC is continuing to regulate by enforcement only.”

Stagnation, indecision, and uncertainty during the Gensler administration had tangible effects — prompting several American digital asset firms to relocate offshore in search of more favorable environments.

This resulted in entities like FTX thriving in The Bahamas — operating beyond the SEC’s jurisdiction — with the fraudulent exchange misappropriating billions from its clients.

Gensler faced a barrage of uncomfortable inquiries following the collapse of Sam Bankman-Fried’s empire, having met privately with the young entrepreneur prior to FTX’s bankruptcy.

Lawmakers accused Gensler of lacking transparency regarding his interactions with FTX, with one asserting he was “singularly responsible for the regulatory failures” that led to its downfall.

As if that were not awkward enough, a revolving door meant that some of FTX’s top executives had previously collaborated closely with Gensler earlier in his career.

Reviewing Gensler’s interviews with financial media — whether with Bloomberg or CNBC — it is evident that this chairman was genuinely focused on consumer protection.

Indeed, one could argue that some of his enforcement actions were beneficial for the crypto sector, particularly when the SEC took action against high-profile individuals promoting dubious altcoins.

Instances like Kim Kardashian endorsing questionable cryptocurrencies without disclosing substantial payments are clearly unacceptable, putting millions of followers at risk of significant financial loss.

However, it was his approach to engaging with crypto companies that created friction — leading to claims that he was hindering innovation.

Most, if not all, American exchanges were eager to collaborate with the SEC and welcomed the idea of regulation, as it would provide them with clear guidelines for innovation and expansion.

Yet, crypto entrepreneurs felt they were the target of an excessive assault under Gensler’s leadership — despite the relatively modest scale of the industry.

Some prominent figures in the industry did not conceal their intense disdain for Gensler when it was announced he would be stepping down.

Kraken chairman and co-founder Jesse Powell labeled him “a clown and a treasonous terrorist,” and there was a notable circulation of middle finger emojis on X.

You are a clown and a treasonous terrorist. You have done more harm to the world than anything you purport to have protected us from. Your staff will appreciate getting back to real work. To that end, I am willing to work with you to accelerate this timeline. How can I help? https://t.co/d24cMmwPui

— Jesse Powell (@jespow) November 21, 2024

It is challenging to speculate on the current state of America’s crypto industry had the SEC not acted as such a significant obstacle — yet, in an unusual way, Gensler may have inadvertently contributed to the market’s revival.

Discontented crypto executives ultimately utilized their considerable personal wealth, along with their company’s resources, to drive the political change they believed was urgently needed.

There is little doubt that their substantial donations to Donald Trump’s campaign influenced his perspective on Bitcoin — and without their financial backing, it is highly improbable he would have introduced a series of pro-crypto policies that included terminating Gensler on his first day in office.

Close attention will now be directed towards who may be appointed as the next SEC chair, with hopes that some of the barriers hindering crypto will be dismantled in the upcoming four years.

There has already been immense interest in Bitcoin and Ether ETFs — and new leadership could pave the way for funds tracking the prices of smaller cryptocurrencies as well.

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To grasp the SEC’s actual influence on the altcoins it was targeting, consider this: XRP has surged by an astonishing 183% over the past month.

The pressing question now is whether the next administration’s acceptance of crypto — complete with a dedicated czar, an advisory council, and a supportive SEC — will come with safeguards that enable everyday consumers to invest in the sector securely.

The post Gary Gensler’s Messy Crypto Legacy — And What Happens Next appeared first on Cryptonews.