Does Gary Gensler’s Controversial Stance on Crypto Make him an Advocate or Adversary?

United States (US) Securities and Exchange Commission (SEC) Chair Gary Gensler is likely more notorious for his negative stance on crypto whilst pursuing an aggressive enforcement campaign against leading companies in the crypto sector.

But there is so much more to him than that.

A Pre-SEC Gary Gensler

Born on 18 October 1957, in Baltimore, Gensler's career trajectory has been marked by diverse roles in finance, academia, and government service.

A graduate of the Wharton School at the University of Pennsylvania, Gensler embarked on his professional journey at Goldman Sachs, rising to prominence as a partner in mergers and acquisitions and co-head of finance.

His academic pursuits led him to the MIT Sloan School of Management, where he served as a professor of the practice of global economics and management.

Gensler's contributions to public service are notable, having served in key roles during the Clinton administration, including Assistant Secretary of the Treasury and Undersecretary of the Treasury for Domestic Finance.

He played a pivotal role in crafting the Sarbanes-Oxley Act of 2002 as a senior advisor to US Senator Paul Sarbanes.

Under President Obama, Gensler assumed leadership of the US Commodity Futures Trading Commission (CFTC) from 2009 to 2014, spearheading comprehensive reforms of the swaps market.

His Wealth of Knowledge Makes Him a Force to Reckon With

Following Gensler's nomination by President Joe Biden, he assumed the position of Chair of the SEC on 17 April 2021, after Senate confirmation earlier that month.

Regarded as a top financial regulator committed to advancing President Biden's agenda for robust oversight of the financial industry, Gensler brings a wealth of experience and expertise to his role at the SEC.

His tenure at MIT has afforded him a nuanced understanding of cryptocurrencies and blockchain technology, informing his advocacy for enhanced regulatory scrutiny of the cryptocurrency industry.

His tenure at the SEC is slated for a five-year term, expected to conclude in 2026.

Nevertheless, an intriguing legal provision affords him the opportunity to extend his service by up to 18 months beyond the term's expiration if a replacement has not been appointed by then.

The First-Ever Spot BTC ETF Approved

Gensler has consistently voiced scepticism toward the crypto market in public forums, highlighting concerns surrounding customer protection and fraud as significant risks inherent to the industry.

Notably, he has expressed opposition to the approval of spot Bitcoin (BTC) exchange-traded funds (ETF).

However, a noteworthy development emerged when Gensler, alongside commissioners Hester Peirce and Mark Uyeda, constituted the majority of the five-member committee that endorsed the filings leading to the inception of the first-ever spot BTC ETF.

In contrast, commissioners Caroline Crenshaw and Jaime Lizárraga dissented from the plans.

Gensler's initial remarks following the approvals reiterated the SEC's cautious stance on bitcoin, suggesting that the regulator's legal setback in 2022, when it faced a court ruling over rejecting Grayscale's proposal, left it with little choice but to greenlight over 12 bitcoin ETFs.

He expressed:

"We did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto."

Ripple CEO Reaffirms XRP and Ethereum Not Securities, Blasts SEC's Gensler

In a recent Fireside Chat with Arrington Capital Founder Michael Arrington, Ripple CEO Brad Garlinghouse delivered a blistering critique of the SEC.

Amidst the escalating debate over XRP's classification, Garlinghouse staunchly defended the token's status and extended his support to Ethereum (ETH).

However, his remarks did not stop there; he also took aim at the SEC and its Chairman Gary Gensler, labelling the regulatory agency's actions as fundamentally flawed.

Furthermore, Garlinghouse characterised Gensler as an "unethical human being."

Gary Gensler's Masterful Evasion of Whether Ethereum is a Security

During an interview with CNBC's "Squawk Box" on Tuesday, Gensler refrained from directly addressing Ethereum's classification as a commodity or security.

Instead, he emphasized broader regulatory priorities, particularly concerning the protection of American investors and the oversight of intermediaries in the crypto market.

The ambiguity surrounding Ethereum's legal status remains a focal point of discussion, as it could significantly impact regulatory measures and the potential inclusion of Ether in ETFs.

While Gensler did not offer a definitive classification, he acknowledged that filings for spot Ethereum ETFs are currently under review by the SEC.

Below is the transcript of the question and Gensler's reply:

Host Aaron Ross Sorkin: Well, let me ask you this. Ultimately, and I think this is the big question in crypto land right now, is Ethereum a commodity or is Ethereum a security? And therefore, will there one day be an ETF? That’s the fundamental question on the table in crypto land. You agree?

Gary Gensler: You're the one that's out there asking the questions. All I would say is, to me, the fundamental question is, is how do we ensure that the American investor is protected? And right now, they're not getting the required or needed disclosures. And the intermediaries in the center of this rather centralised market generally are conflicted and doing things we would never allow the New York Stock Exchange to do. The New York Stock Exchange is not allowed to trade against the investors.

Gary Gensler Sick of Crypto Questions

The head of the US securities regulator, has expressed growing frustration with the disproportionate amount of attention crypto receives compared to traditional finance.

Despite its relatively small share of the financial market, crypto garners significant media coverage due to its association with scams, frauds, and regulatory challenges.

Gensler acknowledged that while crypto's market capitalisation stands at a modest $110 trillion, the industry continues to attract outsized scrutiny from both the media and the public.

When pressed on why the SEC dedicates substantial resources to crypto despite its size, Gensler emphasized that the agency's priorities are driven by broader public interest rather than market capitalisation alone.

Below is the transcript of the question and Gensler's reply:

Gary Gensler: Crypto is a small piece of our overall markets. And -- but it's an outsized piece of the scams and frauds and problems in our markets because without prejudging any one token, much of this field is noncompliant with the protections of our securities laws. And so thus, you end up with like an outsized ratio of journalist questions and crypto journalists to market cap.

Host Aaron Ross Sorkin: But is that a function also of the fact that that's where your attention is, too?

Gary Gensler: No, it's a -- it's a function of where your attention is. Think about it. I've been on your show, what, a dozen times? And every show, you ask about crypto. And my guessing is this will be a majority crypto interview. While the capital markets are $110 trillion. So it’s also about where the financial media is focused.

The entire interview can be viewed below: