Gary Gensler, the new chairman of the Securities and Exchange Commission (SEC), confirmed the invention and legacy of Bitcoin in his first speech on the subject on Aug. 3. He talked about his recent tenure as a professor at the Massachusetts Institute of Technology (MIT). of Global Economics and Senior Advisor to the MIT Digital Currency Initiative, Gensler said, “… I came to believe that Nakamoto’s innovation was real, even though there was a lot of hype in the crypto arena that posed as reality. In addition, it was and could continue to be a catalyst for change in finance and money. ”
Gensler is best known in the financial industry for his time from 2009-2014 as the past chairman of the Commodity and Futures Trading Commission (CFTC), where he developed derivatives regulation at the agency after the global financial crisis. A successful Goldman Sachs investment banker, Gensler was a key member of the Biden transition team for two decades, helping develop plans for US financial regulators.
The speech at the Aspen Security Institute came just days after the Senate attracted national attention over the debate over IRS tax reporting requirements for digital currencies and a new bill in the US House of Representatives. Just days after Gensler’s announcements about Bitcoin and the industry, an SEC enforcement lawsuit against Poloniex for operating as an “unregulated exchange of digital assets” made it clear that there was a new sheriff in the city of Cypherpunks.
Puzzles me, Nakamoto
As a mainstream thought leader in the financial services industry, Gensler underscored the critical importance of Bitcoin for the future impact of global financial markets in his speech. Gensler demonstrated his deep understanding of both the technology and the historical context, stating, “Nakamoto had solved two puzzles that these cryptographers and other technology experts had pegged for several decades: First, how to find something of value on the Internet without a central intermediary; and in connection with how one can prevent the “double issue” of this valuable digital token. “
Gensler talked about what he saw as Nakamoto’s main target. “In essence, Nakamoto tried to create a private form of money without central intermediaries such as a central bank or commercial banks,” said Gensler. However, he believed that Bitcoin had not yet reached the standard for money as a unit of account, a store of value, or a medium of exchange. “First and foremost, crypto assets offer digital, scarce vehicles for speculative investments. In this sense, one can say that it is a matter of highly speculative stores of value. ”
Gensler stated that he was “technology neutral” with regard to crypto assets and made it clear that he is anything but “public-political” neutral and is best positioned to protect investors. Gensler described the new asset class and warned that the industry “… is full of fraud, fraud and abuse in certain applications. There is a lot of hype and fuss about how crypto assets work. ”Most importantly, he focused on the problem of investors being unable to get“ rigorous, balanced and complete information ”. To put it bluntly, Gensler said, “I worry a lot of people will get hurt.”
Do you feel lucky cypherpunk?
Dirty Harry, a famous fictional detective played by Clint Eastwood in the 1970s, mocks a wounded suspect by famously asking him if he was “lucky, punk?” when he reaches for his gun. However, Eastwood’s character began by asking, ‘Did he fire six shots or just five?’ To tell the truth, I forgot myself in all this excitement. ”
Losing track of the tokens that a crypto-asset exchange lists can be a similar type of mistake, based on Gensler’s speech. “While the legal status of each token depends on its own facts and circumstances, the likelihood that for 50 or 100 tokens a given platform would have zero securities,” said Gensler. He doubled that claim in the question-and-answer period, which the moderator described as “exploded” when he said again, “… not over …”
The moderator commented that the Q&A with questions based on these comments had exploded; However, Gensler pointed to his agreement with former SEC chairman Jay Clayton despite being part of the previous administration. While Gensler indicated that “regulation by enforcement” would continue in the markets, he also encouraged platforms to “come in and register with the SEC”.
The way ahead: is digital barbed wire coming to the wild west of the stock exchanges?
Gensler’s comment that “regulation through enforcement” would continue was quickly followed by the “Poloniex Order,” an SEC press release citing a 75 token exchange as an “unregistered digital asset exchange.” While this was not unexpected in the case of this former exchange, which was closed with the SEC for over $ 10 million, the writ of execution was a signal to the market that exchanges in a similar situation could expect the same.
Exchanges that are “Bitcoin only” can benefit, while exchanges listing 100 or more tokens must recognize the risk of the SEC turning them into an “unregistered digital asset exchange” for trading “digital securities” explained. It is not clear how long Gensler’s “open door” policy for exchanges has been discussing, such as how an exchange could either register with the SEC as a stock exchange or apply for an exemption, but the timing of the Poloniex order made no mistake that Gensler did not ” politically neutral ”and to protect investors.
Embedded in what will likely be a crackdown on digital asset and token exchanges over the next five years of Gensler’s tenure with the SEC is likely a repeat of what he did for derivatives at the CFTC. Since the SEC is primarily responsible for overseeing the industry, the crypto asset industry has to grapple with how investors are affected – whether or not a particular digital asset is considered a security.
One area that Gensler has signaled is environmental, social and corporate governance (ESG) or climate change risk. In his Q&A, Gensler said, “Bitcoin mining takes place mainly in China. Much of it is starting to shift … but the question is whether it can theoretically be done with a lot of electricity through dirty coal and also with proof-of-work. In my opinion, the SEC rightly attached great importance to climate change and disclosure. ”Then Gensler asked whether companies registered with the SEC that hold Bitcoin should publicly disclose this to the SEC. While he said he was reserving comment to the SEC staff who prepared the draft language, he nonetheless asked the question: “For example, will you require companies to disclose if they hold cryptocurrencies that have a major impact on the environment?”
If Gensler continues the policies he outlined, the legacy of Bitcoin will likely be perpetuated as a groundbreaking invention that will remain – and the outlook looks good for “Bitcoin only” exchanges that are conservative in their approach. However, regular updates and educational materials that may be made available to the SEC on renewable energy developments and other innovations by Bitcoin miners that are carbon neutral will be essential to the SEC’s decisions on disclosure of the Supporting climate change and the type of reporting required by public corporations.
This is a guest post by Jason Brett. The opinions expressed are solely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.