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Several prominent crypto personalities called for Gensler to approve a spot Bitcoin ETF in response to the piece.
Gensler Says Crypto Needs Securities Laws
Gary Gensler’s latest comments on the digital assets market have gone down like a lead balloon in the crypto community.
The SEC chair published an op-ed titled “The SEC Treats Crypto Like the Rest of the Capital Markets” in The Wall Street Journal Monday, discussing how he thought crypto should be regulated to protect investors. In the piece, Gensler said that there’s “no reason to treat the crypto market differently from the rest of the capital markets” just because it uses new technology, echoing his affirmations 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 that they must comply with regulations regardless of how they market their services. “Across 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, referencing lending platforms, crypto exchanges, and DeFi applications. He added that any lenders offering securities fall under the SEC’s jurisdiction and warned that the agency would serve as “the cop on the beat” for any entities that fail to protect consumers.
Community Slates WSJ Piece
While some praised Gensler for his comments, multiple members of the crypto community took shots at him on Twitter over the paywalled piece. “You can’t have local regs for a global permissionlessly accessible financial system… He thinks you’re too dumb to understand this,” said Starkiller Capital Chief Investment Officer Leigh Drogen. “This US government official unironically shilled his paywall link instead of just acknowledging openly that basically he thinks the entire global economy should already simply comply with US regulations as if America really was the legal capital of the globe,” added DefiDi◎genes.
CoinShares Chief Strategy Officer Meltem Demirors also weighed in. “instead of writing op eds, maybe the agency could try (a) engaging with the market participants it’s supposed to oversee and then (b) make pragmatic practicable rules and enforce them equally,” she wrote. Dizer Capital founder Yassin Mobarak was particularly scathing, accusing the former banker of corruption. “There’s no reason why you shouldn’t disclose your connections to Vanguard, JP Morgan, and Goldman Sachs,” he wrote. “You need to resign. The stench of corruption on you is suffocating.” (Gensler, who formerly worked at Wall Street giant Goldman Sachs and had an estimated net worth of up to $119 million in February 2021, has never been found guilty of corruption).
Several others, including the prominent crypto personalities Cobie and Loopify, took the opportunity to press Gensler on the SEC’s decision to stall on approving a spot Bitcoin ETF. “sounds good, spot etf then?” said Cobie.
Since taking the helm of the SEC in 2021, Gensler has frequently drawn the ire of the crypto community. Much of the frustrations have stemmed from the SEC’s refusal to approve a spot Bitcoin ETF, and Gensler’s repeated comments on how digital assets should be regulated. While he has made it clear that he thinks many crypto tokens qualify as securities, the SEC has not yet published clear guidelines on the matter.
Gensler reiterated in June that he thought Bitcoin was a commodity, but he’s been more opaque about his take on Ethereum and other assets. If Bitcoin is indeed a commodity, it would not fall under the SEC’s purview. The thousands of other crypto tokens on the market, however, 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.