‘You have to resign’: Crypto fans slam Gensler’s regulatory comments

Several prominent crypto personalities asked Gensler to endorse a spot Bitcoin ETF in response to the piece.

Gensler says crypto needs securities laws

Gary Gensler’s latest comments about the digital asset market have gone down like a lead balloon in the crypto community.

The SEC chairman published a text titled “The SEC Treats Crypto Like Rest of the Capital Markets” in The Wall Street Journal Monday, discussing how he believed crypto should be regulated to protect investors. In the piece, Gensler said there is “no reason to treat the crypto market differently than the rest of the capital markets” just because it uses new technology, echoing his claims that securities laws should apply to digital assets as they do traditional financial instruments.

Gensler drew attention to BlockFi and other crypto-lending platforms that faced insolvency crises in the June market meltdown, saying they must comply with regulations regardless of how they market their services. “For decades of cases, the Supreme Court has made clear that the economic realities of a product — not the labels — determine whether it is a security,” Gensler said, referring to lending platforms, crypto exchanges and DeFi applications. He added that all lenders offering securities fall under the SEC’s jurisdiction and warned that the agency would act as the “police on the beat” for any entity that fails to protect consumers.

Community Slate WSJ Piece

While some praised Gensler for his comments, several members of the crypto community took shots at him on Twitter over the paywall. “You can’t have local rules for a global permissionless financial system… He thinks you’re too stupid to understand this,” so Starkiller Capital Chief Investment Officer Leigh Drogen. “This US government official unironically shirked his paywall link instead of just openly acknowledging that he basically believes the entire global economy should already simply comply with US regulations as if America really were the legal capital of the world.” added DefiDi◎genes.

CoinShares Chief Strategy Officer Meltem Demirors too weighed in. “instead of writing op eds, perhaps the agency could try (a) to engage with the market participants it is supposed to monitor and then (b) create pragmatic workable rules and enforce them accordingly,” she wrote. Dizer Capital founder Yassin Mobarak was particularly sharp, accusatory the former corruption bank. “There is no reason why you should not disclose your connections to Vanguard, JP Morgan and Goldman Sachs,” he wrote. “You have to get off. The stench of corruption on you is suffocating.” (Gensler, who previously worked at Wall Street giant Goldman Sachs and had an estimated net worth of up to $119 million as of February 2021, has never been found guilty of corruption).

Several others, including prominent crypto personalities Cobie and Loopify, took the opportunity to press Gensler on the SEC’s decision to stop approving a spot Bitcoin ETF. “psounds good, spot etf then?” so Cobie.

Since taking the helm of the SEC in 2021, Gensler has often drawn the ire of the crypto community. Much of the frustration has stemmed from the SEC’s refusal to approve a spot Bitcoin ETF, and Gensler’s repeated comments about how digital assets should be regulated. Although he has made it clear that he believes many crypto-tokens qualify as securities, the SEC has yet to publish clear guidelines on the matter.

Gensler reiterated in June that he believed Bitcoin was a commodity, but he has been more opaque about his views on Ethereum and other assets. If Bitcoin is truly a commodity, it will not fall under the purview of the SEC. However, the thousands of other crypto-tokens on the market could be in the SEC’s crosshairs if they are deemed to be securities.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.