Gary Gensler’s Take on Crypto Doesn’t Matter
Securities law has been a main topic of conversation for the crypto intelligentsia and unintelligentsia since New York magazine published an interview with Gary Gensler, in which Intelligencer writer Ankush Khardori probed the top US securities regulator late last week about his meeting with Sam Bankman-Fried.
There are many threads to be drawn here, including an important philosophical point about securities law.
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In the interview, Gensler suggested that all cryptocurrencies other than bitcoin are securities. The direct quote was: “Anything but bitcoin, you can find a website, you can find a group of entrepreneurs, they can set up their legal entities in an offshore tax haven, they can have a foundation, they can lawyer it up to try to arbitrate and make it difficult jurisdictionally or so on.”
Still, Gensler’s repetition of “bitcoin is a commodity; cryptocurrencies are securities” has been cause for celebration in the corner of the internet where a certain breed of Bitcoin maximalists reside. (I should know, I spend a lot of time there.) These self-described the toxic maximalists celebrate bitcoin’s special status as a non-security and other cryptocurrencies’ unspecial status as securities.
Never mind how odd it may seem that bitcoiners celebrate regulation, it’s more useful to think about whether regulation even matters. I’ve written before that “…it doesn’t matter whether bitcoin, ether, SOL, dogecoin, or AVAX are considered securities,” and I still believe that. What actually matters is the SEC’s mandate to enforce laws against market manipulation to protect investors is a valiant cause, and to argue that market manipulation only matters in the securities context is flat out wrong.
Who cares if bitcoin is a commodity, security or a pet rock?
The answer is: Many people. But the correct answer is: No one should.
Bitcoin market manipulation should also be stopped, it is not just a crypto problem without bitcoin. It’s not like commodities are immune to market manipulation or anything like that (just ask gold and silver). From the perspective of a lawyer, trader or contractor, it can be significant if Gensler comes forward and claims that an asset is a security.
But the broader point is that whether he calls it a security or not will not change what that asset fundamentally is. It would only mean that another US regulatory body might have some jurisdictional claim over that asset.
We should not ask, “Is XYZ a security?” Instead, we should ask, “How much does securities law and regulation matter if XYZ is borderless, decentralized, and censorship-resistant?”
