Iron-Fisted SEC Chairman Gary Gensler Steps Down as Trump Takes Office
Author: Jessy, Golden Finance
According to a statement released by the U.S. Securities and Exchange Commission (SEC), Chair Gary Gensler, who was initially set to serve until June 2026, will step down early on January 20, 2025.
Coincidentally, this date marks the inauguration of Donald Trump. Trump had pledged during his campaign that if elected, he would fire the "crypto-unfriendly" Gary Gensler.
During Gensler’s tenure, marked by a combative style, the SEC tightened its stance on the crypto industry, launching a series of high-profile lawsuits against crypto firms. Gensler has maintained that most cryptocurrencies are securities and aimed to enforce compliance through regulatory actions. On the other hand, his term also saw the approval of Bitcoin and Ethereum spot ETFs, which were milestones for the crypto sector.
Claiming Neutrality Toward Blockchain
Gensler’s relationship with the crypto industry dates back to 2018 when he taught at MIT and conducted a course on blockchain. The course delved into the technical aspects of blockchain and examined its potential legal and investor impacts. His lectures portrayed a neutral and curious attitude toward blockchain technology.
When he assumed the role of SEC Chair, some hoped his forward-thinking perspective on crypto would influence policy. However, his stance shifted significantly upon taking office.
In 2022, during a downturn in the crypto market marked by events like the collapse of Luna and FTX, the SEC launched aggressive litigation against the crypto industry. These actions ranged from targeting companies to suing individuals, such as Kim Kardashian, for failing to disclose paid crypto endorsements. Notably, the SEC filed lawsuits against major exchanges like Binance and Coinbase and pursued cases against crypto projects such as Ripple, Luna's parent company, and BlockFi.
Gensler’s SEC also clarified its stance on stablecoins and staking services, declaring them potentially securities requiring registration. In 2023, the SEC charged Kraken for offering unregistered staking services, resulting in a $30 million settlement.
These actions underscored the SEC’s intent to regulate crypto through enforcement. According to Fortune, whenever Gensler appeared before Congress, his repeated message on crypto was: "Come in and register." He also publicly described cryptocurrencies as being rife with fraud, scams, bankruptcy, and money laundering.
Despite his stringent enforcement approach, the SEC approved Bitcoin and Ethereum spot ETFs in 2024, a surprising development that reinvigorated the crypto market.
These seemingly contradictory actions align with a single objective: bringing crypto under U.S. regulatory oversight.
Gensler’s attitude and actions largely reflect the Biden administration’s broader agenda, which prioritizes regulatory strengthening as a key strategy.
A Strong-Willed Financial Elite
Beyond crypto, Gensler’s SEC tenure included policies like financial market structure reforms, proposing restrictions on payment-for-order flow to promote market fairness, advocating for enhanced environmental, social, and governance (ESG) disclosures, and intensifying crackdowns on market manipulation and insider trading.
In emerging technologies like AI, Gensler exhibited a paternalistic regulatory approach, scrutinizing how financial firms use AI and algorithms to influence customer behavior while exploring measures to protect consumers.
These initiatives aimed to enhance financial market regulation and investor protection, especially in response to technological advancements and crises. Among his policies, addressing climate change was particularly prominent, aligning with the Biden administration’s efforts to combat climate change but drawing backlash from industrial sectors for being overly stringent and allegedly unconstitutional.
Critics of Gensler’s aggressive crypto regulation and tough climate policies included affected stakeholders and industries. Trump, during his campaign, promised to appoint a crypto-friendly SEC chair and relax restrictions on fossil fuels, including streamlining permits for drilling on federal lands to boost U.S. oil and gas production.
It is likely that many of Gensler’s policies will be repealed under Trump’s administration.
For the crypto sector, Gensler’s term laid the foundation for U.S. regulation of the industry. His policies aimed to protect investors and maintain market stability amidst rapid growth and accumulating risks in the crypto space, emphasizing their necessity and urgency.
However, his enforcement-heavy approach—favoring punitive measures over proactive rulemaking—created uncertainty about regulatory direction. This lack of clarity hindered industry growth, leaving companies unsure about compliance requirements. As a result, some crypto firms relocated to jurisdictions with clearer regulatory frameworks, such as Singapore and Dubai.
A telling example is the SEC’s unregistered securities case against Coinbase, which coincided with Coinbase suing the SEC for rulemaking. When Coinbase requested comprehensive regulations for the crypto industry, the SEC denied the request, prompting Coinbase’s lawsuit alleging arbitrary and capricious behavior by the SEC.
Gensler’s assertive personality played a significant role in shaping his regulatory approach. Described by colleagues as ambitious and eager to enact policies, he exhibited this trait during his tenure as Chair of the Commodity Futures Trading Commission (CFTC) under President Obama. Earlier in his career, he was one of the youngest partners at Goldman Sachs by age 30, later serving in roles such as Assistant Secretary and Under Secretary of the Treasury.
A review of Gensler’s career and policies reveals his alignment with U.S. national interests, using various regulatory measures. As a traditional finance elite, he approached crypto with initial curiosity, skepticism, and disdain but could not ignore its evolving relevance.
During his tenure, he focused on strict enforcement rather than fostering legislative clarity for crypto, reflecting a conservative stance. The approval of Bitcoin and Ethereum spot ETFs can be seen as a concession to the inevitable, akin to boiling water reaching 98°C before tipping into full compliance. Ultimately, his stance likely reflected the interests of traditional financial elites—disapproving of uncontrolled crypto while welcoming its integration into conventional finance.
This article was sourced from Foresight News:
https://foresightnews.pro/article/detail/71948
AIC Team
November 25, 2024
