Sorry crypto bros, Gary Gensler is right
On April 18, US Securities and Exchange Commission (SEC) Chairman Gary Gensler appeared in the latest House Financial Services Committee hearing, the first of its kind in 18 months.
Gensler remained cool, calm and collected even as he faced a barrage of criticism, mostly from the GOP side, for refusing to budge on his position that existing securities laws apply to the digital currency industry.
In a somewhat conflicting flood of complaints, Gensler came under fire for not being clear on the regulations and creating too many of them too quickly. Still, even in the eye of the storm, the SEC chairman patiently reiterated his longstanding position that existing financial regulations and existing laws created by Congress apply and always have. While many industry media portrayed him as confused and out of touch, he was anything but and remained steadfast throughout.
After the hearing, digital currency influencers on Twitter moaned about Gensler, and Representative Warren Davidson (R-OH) even went so far as to call for Gensler to be removed as SEC chairman.
It’s another example of the all-too-common overreaction in industry after being told that the laws and rules of a democratic nation apply to them.
gary gensler is a little bitch
— Tiffany Fong (@TiffanyFong_) 19 April 2023
Great, well reasoned and highly logical points there, Tiffany!
Gensler is right, and the ‘crypto bros’ are wrong
To anyone half-educated or sane, it’s not a huge surprise that the head of the SEC is right about securities laws, while ideological fanatics who have fundamentally misunderstood Bitcoin are wrong. Still, here we are.
As new industries emerge, it is always the case that regulators must strike the right balance between innovation and customer protection. However, this does not mean that governments must compromise on applying existing laws when new industries break them.
Whether Gensler is right that most digital currencies are securities remains to be seen and will be decided in court, but using the Howey test, it’s hard to see how he’s wrong. In any case, he is right that regulations and restrictions protect customers from the bad players in the industry; just look at how Japanese regulations helped protect the citizens of that country from the FTX fallout.
Speaking of Japan, the rules in that country clearly show how industry players are not entirely honest when they ask for clarity in the regulations. Not only has Gensler been 100% consistent and clear about the fact that existing rules apply from day one of his chairmanship, but exchanges like Coinbase (NASDAQ: COIN ) pulled out of Japan, which has crystal clear rules.
What these digital currency exchange bosses really mean is that they want favorable regulations that allow them to sell unregistered securities to the unsuspecting public while pumping and dumping them on naive speculators who have bought into the idea that they are part of a financial revolution. To Gensler’s credit, his words and actions show that won’t happen on his watch.
Whether digital currency exchange bosses like Brian Armstrong and Jesse Powell like it or not, they will have to play within the boundaries of the laws of the nations in which they operate, and where they have broken them, they will have to pay the piper.
All the complaints and disingenuous appeals are just tactics to delay the inevitable collision with the oncoming regulatory meteorite. All the lobbying dollars they’ve pumped into the pockets of morally inflexible congressmen and senators are unlikely to save them.
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Ethereum, FTX and Tether—who have chosen the digital asset revolution and turned the industry into a minefield for naïve (and even seasoned) players in the market.
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