Recently there have been a number of articles that have come out about Gary Gensler and his time before being the head of the SEC. Let us see what is being said.
Gary Gensler before the SEC
According to a claim by Binance lawyers, Gary Gensler offered his services o Binance back in 2019. At that time Ginslear was teaching at Massachusetts Institute of Technology’s Sloan School of Management. The proposed offer was for Gensler to take an advisory role for Binance's main company. This offer was allegedly made several times back in March in 2019. And was made in conversation with Binance executives and Changpeng Zhao, Binance CEO. Eventually, Gensler where able to sit down with Zhao for lunch in Japan.
This certainly can paint a picture of a person out for revenge after he was rejected for a position one would assume would have been well paying. I assume it is most likely one of the goals with this. To paint the SEC simply as a tool Gensler is using to get revenge on a company that wronged him in the past.
Is Gensler out for revenge?
But according to the Wall Street Journal who also published a post on Gary Gensler's connection to Binance. In it, they say that according to internal messages at Binance, and close contact with Gensler. It was in fact Binance that approach Gensler. This does paint a slightly different picture, one that is showing Gensler in a better light than the previous one.
Which is true? I don't know, I where not able to find anything other than the normal he said she said things. I guess that means the judge is out for lunch on this one, right? Well, there might be some additional information we can use to take into account that might help. Not as it will show if either of the two sides are true or not. But it certainly will speak to the character of the SEC and Gary Gensler.
SEC and crypto
After Gary was appointed as chair of the SEC back in 2021. That is more or less when we start to hear rumblings about regulations and crypto. If we do some searches we will find numerous posts about how the SEC and Gensler were saying "come in and register" and Gensler have been quoted as saying "my door is open". Eluding that he and the SEC were open to helping crypto companies to register and get the proper paperwork in order to be allowed to trade securities. As that is what it all comes down to.
*Knock, knock* Who is there? The SEC. SEC who? ... Sorry but I could not come up with something funny here. I guess It is hard when it comes to the SEC
Two companies that did just that were Coinbase, yea the very same one that is now being sued by the SEC. The second where Robinhood. Let us take a look at what Coinbase has to say about its experience with the SEC and its "come in and register" stance.
Specifically, the SEC asked us to provide our views on what a registration path for Coinbase could look like – because there is no existing way for a crypto exchange to register. We developed and proposed two different registration models. We spent millions of dollars on legal support to build these proposals and repeatedly asked for the SEC’s feedback. We got none. ... We met with the SEC more than 30 times over nine months, but we were doing all of the talking. In December 2022, we asked the SEC again for some feedback on our proposals. The SEC staff agreed to provide feedback in January 2023. In January, the day before our scheduled meeting, the SEC canceled on us and told us they would be shifting back to an enforcement investigation.
It kind of looks like either SEC has no clue at all on how to do their business. Or they are just stringing Coinbase along? Using their cooperation to keep building their case against them. None of those two options paint the SEC and Gary Gensler as its captain in any good light whatsoever. But let us take a look at what Robinhood has to say about their experience.
When Chair Gensler at the SEC in 2021 said, ‘Come in and register,’ we did,” said Robinhood Markets' chief compliance lawyer Dan Gallagher in his testimony. “We went through a 16-month process with the SEC staff trying to register a special purpose broker dealer. And then we were pretty summarily told in March that that process was over and we would not see any fruits of that effort,
THE FUTURE OF DIGITAL ASSETS: PROVIDING CLARITY FOR DIGITAL ASSET SPOT MARKETS is the hearing in question
This was said by Robinhood in testimony in the U.S. House of Representatives. A different company but a very similar story. Coinbais is cited as saying that something changed in the sEC at the start of the year. But what that "it" is I don't think anyone other than maybe a handful of people in the SEC knows. But I think it looks like the SEC never had any intention of dealing with crypto companies in a fair way. 16 months and nine months, that is a looooong time and an expensive time for the companies to engage with the SEC and how nothing to show for it. Well, that's technically not true, They are getting sued. So there is that. Robinhood is however looking like they will be able to evade getting sued as long as they delist and stop trading the new securities.
What do Gary Gensler say?
There have been a few posts that have comments made by him. They might add some extra layers to this, and can maybe help us t see the true side of the SEC and Gensler. Because I very much think the SEC is acting as an extension of the man in charge. If it is not, then at least he is the person responsible for how it is acting. But let us take a look at what Gensler is saying.
On June 6 Genslair gave an interview on air on CNBC. In it, they talk about the Binance and Coinbace cases. But what I find interesting is that he says that "we don't need more digital currency, we already have digital currency". He then goes on to list several big currencies like USD, Euro, or the Yen. talking about how they are "digital". He also mentions there already existing "digital" investments and mentions tech- and automobile companies as examples.
This comment alone has sparked some headlines, and rightfully so. But they seem to all focus on the first part, the "we don't need more digital currencies". And while I think that is important, I also think the second half is just as important. The first part can more or less mean that either all the crypto we have is all we need. Nothing more can really be added. And to a certain degree, I would be willing to agree with that. I mean what is the latest hotness in crypto right now, f-king meme coins? Can shit coins get worse, well they just have.
But to say that we do not need more crypto because we already have it all. To me, this is just as crazy as when China decided to close down to foreigners. More or less thinking they already have and know everything. But if anything the most recent AI innovations just have shown us we don't know when or where the next technological breakthrough will take place, or what it will be. What if the scientists managed to get electric stablecoin working? In theory, it works, but the scale and way to achieve it are still blurry. But if they could make it work it will have to potential to revolutionize the way we transport power. As it eliminates the need for power lines. And it even would help solve production bottlenecks and storage problems. Because we could just mint electrical stablecoins. Also one could technically use the power even before it where generated. Through a power IOY if you will. Sound like the ravings of a madman, yes I know. If you like to know more about it you can read all about it here.
Let us get back to Mr. Gensler. If we now take the second part into account. I think it becomes obvious that he sees no use for any cryptocurrencies. All he sees them as is the competition to or subpar versions of what already is there and under the government's control. I base this on his flawed statement of what he sees a digital currency or investment as. Just because you can access your bank and buy stocks online does not make them "digital" in any way shape or form other than the most basic semantic way. They share non of the use cases that make cryptocurrency and the blockchain useful in my opinion. But most likely Gensler will look at CBDCs to address that.
There is a new sheriff in town, willing to get down and dirty and clean ut the crypto rabble
In the interview, Gensler more or less also states that all crypto companies blatantly is disobeying the laws. Taunting the SEC to as he put it "catch us if you can". He then goes on to say not all the apples are bad. There has been one who has registered with them in the last two weeks. I guess that means that Coinbase, Robinhood, and whomever else that have tried to register and have talks on how to do it with the SEC is just either totally incompetent. Ans obviously there is a way to do it, they just can't figure out how to. Or they are blatantly unwilling to submit and follow the guidelines the SEC has regarding how to register. I guess that means that Coinbase and Robinhood are lying about their efforts. Al those meetings over months must not have taken place, because if it did surely they would have registered, right?
I guess both companies must be lying about their experience with the SEC and how the SEC more or less stopped talking to them and shut the door in their faces. Oh, and also lied in front of the U.S. House of Representatives when they testified there. Something I assume is done under oath. Also, their blatantly lying about the SEC surely means they would be called out on this by the SEC. I mean the SEC must have kept records of the meetings and interactions. So it should be easy to disprove them... Because it can't possibly be that it literally took the SEC up to 2 weeks ago to figure out how to get a crypto company to register. Definitely not. And it would definitely not be the case that they could then use that as a thing to show "look companies can register, just these bad ones don't want to, buuu bad crypto companies". Of course just pure speculation on my part.
Crypto companies know how to register, they just don't want to
Gensler also made an appearance at 2023 Global Exchange and Fintech Conference held last Thursday. There he dismissed the notion that companies do not know how to register. Saying:
We’ve issued a reopening release that reiterated the applicability of existing rules to platforms that trade crypto assets securities, including so-called DeFi systems, that’s already the law. That’s already the rules, ... Not liking the law, not liking the rules is different than not hearing it or not getting it.
He also gave what can be a comment on the claims from Coinbase and Robinhood, regarding them claiming the SEC refused to work with them.
seeking a bunch of meetings with the SEC during which you’re unwilling to make the changes needed to comply with the securities laws,
In short, the companies know how to register. They just refuse to comply with the rules and the law. Again hinting to previous comments made about the companies blatantly disregarding the rules, challenging the SEC to "come get them". And this was something he even iterated back in March in a post. There he was quoted as saying:
it’s simply that their business models rely on being noncompliant. ... At times, it has felt like some have sought a stamp of approval for noncompliant activity, rather than changing a fundamentally non-compliant business model rife with conflicts.
The look on Gensler's face when being tricked into being in the same room as a crypto companies representative?
A bit softer stance than what he appears to have adopted recently. In the same interview, he also says that the SEC has been very clear with what they consider to be a security. And the fact that companies listing them need to register with the SEC. But to probably no one's surprise at this point. In the same post, voices are being raised by persons in the crypto community that are more or less calling BS on the statements made by Gensler. Calling them out for trying to use the old rules for the new technology that crypto and the blockchain are. And simply refusing to see the differences and need for new rules and regulations to allow cryptocurrencies to exist within the old regulatory framework. Or if you will the SEC is trying to smash a round peg in a square hole. Then going on blaming the peg for not fitting.
We invite them in, make them look left then hit them with a right
The persons even went as far as saying that crypto startups are incentivized to not engage with the SEC and their "open door policy". Because of the bad faith, the SEC has acted under. This is to avoid entering "settlement" discussion or ending up with fines and bad publicity.
All in all, I think it paints a pretty clear picture of the captain that is steering the SEC, and indeed the SEC itself. It is the mentality of a 10-year-old boy who is not getting their way when playing with their toys. Angry and have just started to bang two toys on the table because they will not do what he wants. Instead of facing the fact that there is the need for new regulations, double down and start banging the toys even harder. But it is hard to see if Gary Gensler just is being a good soldier, simply following marching orders. Or if this is actually his belief. But then again I think we can assume that he actually believes he is correct to some degree. At least I think that is a safe assumption based on the amount of toy smashing.
Hopefully, you can make up your own mind on what you think about the SEC and its chair Gary Gensler. I know I have not been able to provide the most neutral views all the time, even if I at least tried to do it. But there should be links to most, if not all the sources I used and pulled information from, in case you want to check and go over it yourself.
What are your thoughts about the SEC, has reading this changed your opinion in any way? Please share your thoughts below with me and everyone.
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