How SEC Chair’s Views on the Industry Evolved Over Time

• The SEC has waged war against the cryptocurrency industry this year with a string of lawsuits.
• At the heart of it is SEC chief Gary Gensler – who has railed against crypto since taking office.
• Amid his regulatory battle against crypto, Insider maps the evolution of his views on the sector.

Newsflash: Gary Gensler doesn’t much like the cryptocurrency industry. 

The chair of the Securities and Exchange Commission has waged all-out war on the digital-asset sector since his appointment in 2021 – gaining praise from cryptocurrency skeptics and backlash from its supporters. 

Now the battle is getting messier. On Tuesday, America’s chief regulatory body suffered its most severe setback so far – after an appeals court overturned its decision to block a spot Bitcoin exchange-traded fund proposed by Grayscale Investments. 

Gensler is undeterred, however – doubling down on his rhetoric as the SEC wades further into the cryptocurrency sphere. Here, Insider takes a look at his evolving stance on the industry. 

In the beginning

Before Gensler’s appointment to the SEC in 2021, and in the pre-Covid cryptocurrency boom, he was considerably more optimistic about the blockchain’s prospects. 

“Though literally thousands of projects have yet to land on broadly adopted use cases, I remain intrigued by Satoshi’s [the alleged creator of Bitcoin] innovation’s potential to spur change – either directly or indirectly as a catalyst,” he wrote in an op-ed for CoinDesk in December 2019. 

 “The potential to lower verification and networking costs is worth pursuing, particularly to lower economic rents and data privacy costs, and promote economic inclusion,” he added. 

Upon his accession to the SEC, however, the former Goldman banker began using a ‘poker chips’ analogy to describe the tokens. 

“The $125 billion of stablecoins we have right now are like poker chips at a casino,” Gensler told Congress in October 2021. “I do think that if this continues to grow – and it’s grown about tenfold in the last year – it can present those systemic wide risks.”

Gensler and the FTX fiasco 

After the dramatic collapse of Sam Bankman-Fried’s cryptocurrency exchange FTX in November, Gensler became considerably tougher on the industry after receiving blame for his role in the disaster.

 This was down to lawmakers criticizing the SEC and Gensler himself for not being alert to FTX’s wrongdoing sooner and failing to protect investors as the exchange collapsed, according to Coinbase. 

In a letter to the SEC, US representative Ritchie Torres labeled Gensler as “singularly responsible” for the FTX catastrophe, Fortune Crypto reported. 

As 2023 progresses, Gensler has become more hardline on crypto – waging lawsuits not just against FTX, but also the Binance and Ripple platforms. 

“The platforms often are co-mingling and trading against you and have market-makers that are on the other side of your trades. We don’t allow that in the rest of our securities markets,” he told Bloomberg TV in July.

“The securities laws are there to protect you, and this is a field rife with fraud, rife with hucksters. There are good-faith actors as well, but there are far too many that aren’t.”

Lawsuit fatigue

After almost six months of attrition warfare, Gary Gensler had crypto on the ropes. But a pair of recent legal setbacks have scored some victories for the digital asset industry as platforms seek to avoid being recognised as securities – as a means of dodging increased regulatory scrutiny. 

The SEC’s most painful defeat came on Tuesday when an appeals court overturned its decision to block Grayscale Investments’ proposed spot Bitcoin ETF. The ruling may open the floodgates for the potential release of products the SEC believes are unsafe for retail investors. The regulator is reviewing the decision. 

Gensler is in the spotlight this week not just for crypto. The Committee on Capital Markets Regulation revealed that the SEC chief hit the financial sector with more new rules and regulatory proposals than any of his predecessors since the aftermath of the 2008 financial crisis, the FT reported.