Date: 07/20/2023
Author: Mr. X
Securities and Exchange Commission Chair Gary Gensler called for a budget increase for his agency as it grapples with the “Wild West” of cryptocurrency. He asked for an additional $72 million to tame markets that he said were “rife with noncompliance.” Overall, he was hostile to the sector.
There’s ongoing litigation with a number of these crypto platforms and these platforms are commingling a number of services that you’ve seen on these crypto platforms where they could well be trading against their customers, bundling up a bunch of services that we would not allow in any other parts of our capital markets.
However, lawmakers grilled him on the recent result of one of those litigation battles, where the SEC won a mixed verdict. He said the SEC is “pleased” that the token was a security when sold to retail investors but “disappointed in other aspects about retail investors.” He claimed the agency is still looking at the decision.
It’s clear Gensler isn’t happy about cryptocurrency’s growth. “Such growth and rapid change also mean more possibility for wrongdoing,” he said. “As the cop on the beat, we must be able to meet the match of bad actors.”
Congressman Ritchie Torres, a New York Democrat, recently argued that Gensler was “intent on sabotaging the industry.” He compared him to a cop who pulled drivers over for speeding without actually telling anyone what the speed limit is. This, he said, was “regulation by enforcement.”
Our role as policymakers should be to create a framework that protects customers and investors,” he said. It does not fall on us to determine the utility of blockchain technology. That’s a judgment only the market can make.” He recently wrote a fairly offensive open letter to Gensler asking whether he “intends to come to terms with the folly of the Commission’s crusade against crypto assets in light of the latest decision by Judge Annalisa Torres of the Southern District of New York.” Somehow, I doubt the Chair will respond to the loaded question.
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Senator Bill Hagerty, a Republican of Tennessee, made similar charges. He accused the SEC of having “anything but clear” rules for the sector and said it was “creating a great deal of uncertainty in the market.” Senator John Kennedy of Louisiana, another Republican, accused Gensler and the SEC of allowing the FTX fraud to happen. Gensler said that it takes time to bring investigations and began telling stories about other things his agency had done, only to be interrupted by Kennedy telling him that the “cow was out the barn.” However, Gensler was able to respond in better form after this interruption about the way FTX called his agency “sketchy” and appealed to the public in response to the SEC’s investigations, only for FTX to be revealed as fraudulent in the end.
It should be noted that the SEC actually has moved forward and accepted six applications for bitcoin exchange-traded funds from BlackRock, Bitwise, VanEck, WisdomTree, Fidelity, and Invesco. Such applications have been rejected in the past, so this represents a significant advance. NASDAQ has said that it will work with Coinbase (COIN) to meet the SEC’s concerns.
The bottom line is that the SEC is making a power play to ensure its absolute right to regulate the cryptocurrency market as much as possible, maximizing the regulatory potential created by the relatively uncertain and unclear cryptocurrency rules. However, this will actually benefit Bitcoin, an asset that is far easier to grasp, not linked to any particular company, and clearly treated as a currency and not a security by the recent court ruling about Ripple. For those determined to invest in crypto but worried about the SEC, BTC is the best choice.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doing
