What did the cryptocurrency expert Gensler do after he took office as the chairman of the US SEC?
“2021 is the year when cryptocurrencies break the circle. Many cryptocurrencies continue to skyrocket in 2021. The newly appointed SEC chairman in April this year also made the industry cheer and believe that the new chairman will introduce a cryptocurrency-friendly strategy.
The Bitcoin futures ETF listed on October 19 may also have a certain relationship with the support of the new SEC chairman. But is this really the case? “
Gary Gensler, born on October 18, 1957, is a US government official and former investment banker. Since April this year, he has served as the chairman of the US Securities and Exchange Commission (SEC).
Unlike the previous SEC chairman, Gary is a professor who studies blockchain and cryptocurrency, and has a deep understanding of finance and blockchain technology.
Introduction to Gensler
Gensler has a very brilliant resume. In 1979, Gensler joined Goldman Sachs and became one of the youngest partners of the company at the age of 30. In the 1980s, he served as a top M&A banker, responsible for Goldman Sachs’s advice to media companies. Subsequently, he entered the trading and financial fields in Tokyo, where he directed the company’s fixed income and currency transactions. During his tenure at Goldman Sachs, the team led by Gensler provided the National Football League (NFL) with the most profitable deal in television history at that time, when the NFL received a $3.6 billion deal in television sports broadcasting rights.
Gensler left Goldman Sachs 18 years later, when he was nominated by President Bill Clinton and confirmed by the U.S. Senate as Assistant Secretary of the Treasury. From 2009 to 2014, Gensler served as the 11th Chairman of the Commodity Futures Trading Commission (CFTC) of President Barack Obama. Gensler also served as the chief financial officer of Hillary Clinton’s 2016 presidential campaign. Gensler is a professor of global economics and management practice at the MIT Sloan School of Management and a senior consultant for the cryptocurrency program of the MIT Media Lab. He focuses on the intersection of finance and technology, and is engaged in the research and teaching of blockchain technology, cryptocurrency, financial technology and public policy.
In 2021, President Joe Biden nominated Gensler as the 33rd chairman of the US Securities and Exchange Commission. On April 19, 2021, the United States confirmed that Gensler’s term of office is 5 years until 2026. In June 2021, he replaced Allison Lee, acting chairman of the SEC, and became the new chairman of the SEC.
GaryGensler’s past cryptocurrency views
Gensler is a professor at the MIT Business School and a senior consultant for the cryptocurrency project of the MIT Media Lab. One of the courses he taught at the MIT Business School was blockchain and currency, focusing on the development of Bitcoin and the impact of blockchain on the financial industry.
At the MIT Technology Review Magazine Forum in April 2018, Gensler gave a speech. He believed that blockchain technology is a good thing for the entire financial industry. However, cryptocurrency, exchanges and related token issuance fundraising activities based on this technology ( ICO) still cannot be followed, and there are no existing laws and regulations to regulate this industry.
At that time, Gensler believed that the purchase of tokens was an investment behavior. In other words, the tokens sold by ICO were similar in nature to stocks. Therefore, they had to comply with the Securities Law to register with the Securities Regulatory Commission (SEC) and be obliged to provide them to regulators on a regular basis. Company financial information. Gensler mainly takes Ethereum and Ripple as examples, and emphasizes that these tokens are more similar in nature to traditional securities.
At a blockchain business summit held in 2018, Gary Gensler believed that blockchain technology has the real potential to change the financial world; although there are still many technical and business challenges to be overcome, this innovation can reduce the cost of the financial system And risk. He is a blockchain optimist and wants to see this technology succeed.
At that time, ICOs were crazy all over the world. Gary Gensler believed that although ICOs lacked the traditional characteristics of stocks or bonds, investors clearly hoped to achieve possible appreciation through the efforts of promoters and development teams. These are the long-term standards in the definition of US securities laws.
At the 2018 CHAINSIGHTS Global Summit held in New York, USA, Gary Gensler shared his unique insights on the blockchain and cryptocurrency industry. He believes that the cryptocurrency market is large and highly volatile, while Bitcoin, Ethereum and Ripple are essentially securities. In addition, the development of cryptocurrency needs to clarify two issues: one is the real risk in the field of cryptocurrency; the other is the protection of the rights and interests of public investors.
Gary Gensler also recommends that ICOs and other tokens must comply with securities, commodities and derivatives laws. In the face of new technologies such as blockchain, market participants, investors, entrepreneurs, technology developers, regulatory agencies, and political leaders should all play their roles and conduct effective supervision.
Gary Gensler also expressed his views on cryptocurrency exchanges. He said that exchanges also have tens of millions of customers around the world. Like traditional securities and derivatives exchanges, crypto exchanges provide customers with transaction matching services and orders. They also provide extensive market making, consulting, and custody. service. However, there are some notable differences between cryptocurrency exchanges and traditional trading. Cryptocurrency exchanges provide customers with direct access, rather than through an intermediary. Therefore, the client’s encrypted funds are kept by the exchange, usually stored in digital wallets, rather than stored in banks, broker-dealers. In this way, as long as supervision is not in place, cryptocurrency exchanges will easily “run away” and run away with money, causing investors to suffer losses.
In December 2019, Gary Gensler published an article “Even if a Thousand Projects Don’t Make It, Blockchain Is Still a Change Catalyst” on the blockchain media website Coindesk. This article has an objective attitude towards cryptocurrency, but at the same time, the article also pointed out the current situation of the crypto financial market is out of touch with supervision. For example, many exchanges have begun to provide trading services to retail investors without complete compliance, and illegal activities such as fraud and market manipulation are still emerging. Judging from the articles and ideas at the time, his appointment as the chairman of the SEC is bound to promote the supervision of the US in the crypto market.
Articles written by Gary Gensler
It is worth noting in this article that Gensler emphasizes that Libra (now renamed Diem) is likely to be a security that needs to be subject to the same supervision as other investment products. Facebook wants to launch its own token is bound to be subject to strict supervision and SEC review to some extent.
In terms of taxation, Gensler particularly emphasizes that the privacy and anonymity of encrypted assets poses a major challenge for regulators to check tax evasion. Last year, the US Internal Revenue Service announced that taxpayers need to register crypto assets, including Bitcoin, in order to collect taxes.
Although Gensler is relatively rigorous in enacting cryptocurrency laws, it is still generally supportive.
In a hearing in the US Congress in July 2018, some congressmen said that the cryptocurrency project is a Ponzi scheme and has no value. Gensler retorted that gold has no value, and its value is also the economic value given to it by people. He also believes that cryptocurrency can be regarded as a digitized rare metal with a certain value.
The outside view at the time
After Gary Gensler was elected as the chairman of the SEC, Brad Garlinghouse, CEO of Ripple (a cryptocurrency issuer and company that mainly solves global encryption payment technology), tweeted: “Congratulations Gary Gensler! We are ready to make changes with the SEC leadership and the Biden administration. Extensive cooperation has pointed the way for the innovation of blockchain and encryption technology in the United States.”
Brad Garlinghouse congratulates Gary Gensler on his election as SEC Chairman Twitter
In fact, the US SEC initiated a prosecution against Ripple in December 2020. The SEC considers Ripple (the company’s token) to be an unregistered security, but it has been illegally sold in the United States since 2013 until today. So it sued Ripple and its CEO Brad Garlinghouse and co-founder Chris Larsen.
Cao Yin, managing director of the Digital Renaissance Foundation, once stated to Lianxin: The main reason for the appointment of Gary by the U.S. government is that he was the chairman of the CFTC before. He has very rich experience in the financial derivatives market and is more suitable for some of the current SEC supervision. Require. Therefore, this appointment does not represent a turning point in the US government’s regulatory attitude towards the cryptocurrency industry.
When Gary Gensler took office, it coincided with Bitcoin’s skyrocketing period, and many people turned their attention to Bitcoin or other cryptocurrencies. As Bitcoin is becoming more and more popular in the US market, there are already products such as Bitcoin futures, Bitcoin options, and gray trust funds in circulation in the American securities market. Secondly, public investors in the United States are already buying Bitcoin spot directly on exchanges like Coinbase and Kraken, or through Square and PayPal.
The exchange is registered and subject to supervision and compliance with the law
In September 2021, the SEC warned Coinbase not to launch loan products, otherwise it will file a lawsuit against Coinbase. This product allows customers to put their cryptocurrency into lending products and earn interest from it. Coinbase published an article on September 8 stating that it will delay the launch of lending products. The SEC believes that such products should comply with existing securities laws, even though such products are becoming more and more common around the world.
The SEC has also launched an investigation into Circle, an international blockchain payment technology company. In August 2021, the Circle report was investigated by the SEC. On October 4, Circle mentioned in its S-4 form submitted to the government that it had received a subpoena from the SEC, requesting “documents and information about certain assets, customer plans, and transactions.” Circle emphasized that they are “fully cooperating” with the US Securities and Exchange Commission in the investigation. The document did not specify its scale and details.
In June, Circle announced the launch of Circle Yield, a service for mortgage cryptocurrency interest collection, allowing commercial institutions to mortgage USDC stablecoins and earn high interest rates. Circle officially announced its “backdoor listing” plan in July this year, and listed on the US stock market through a merger with SPAC, with a valuation of up to US$4.5 billion.
On September 22, Gensler called for cryptocurrency exchanges to register with the SEC in an interview and warned that if they do not do so, they will be hit by the SEC’s enforcement actions. He pointed out that the SEC will continue to file law enforcement cases against cryptocurrency exchanges that refuse to register with regulatory agencies, and he fears that lack of supervision will ultimately harm the interests of US investors.
The hidden worries of stablecoins
The SEC also places its regulatory goals on stablecoin issuers. In September 2021, Gensler stated that it would supervise stablecoin issuers and decentralized exchanges. He also pointed out that stablecoins may cause financial stability issues and are a priority for the SEC. Gensler said bluntly: stablecoins linked to the US dollar are like chips in a casino. If stronger supervision is not implemented, investors will be harmed.
Stablecoins are cryptocurrencies, but the price is anchored to the U.S. dollar, 1 USDC/USDT=1 U.S. dollar. The issuing institution, such as Tether, stated that there is a one-to-one correspondence of US dollars behind all issued USDT, that is, 6 billion USDT is issued, then their reserve cash will be 6 billion US dollars. However, this is actually not the case.
According to a document released by Tether in July 2021, it actually shows only a small proportion. The rest are used to buy bonds or cryptocurrencies, etc. The specific asset composition is shown in the figure below.
Tether’s asset composition
Source: Tether “INDEPENDENT ACCOUNTANT’S REPORT”
In the recent Evergrande debt crisis, market rumors that Tether also holds Evergrande’s bonds have caused regulatory concerns. In August 2021, USDC issuer Circle announced that it would no longer hold commercial paper and bonds as reserve assets; starting from September, all USDC reserve assets will be exclusively US dollar cash and short-term US Treasury bonds.
As the market value of stablecoins continues to rise, many people expect that the US government will require stablecoin issuers to accept the strict regulatory system at the same level as Bank of America, including requiring stablecoin issuers to formally register as banks.
The market value of stablecoins continues to rise
The SEC has also set its regulatory sights on DeFi. On September 3, the SEC formally investigated Uniswap Labs (the development team of the leading DeFi project Uniswap). The SEC’s law enforcement officers are collecting information, studying how users interact with the platform, and Uniswap’s marketing methods. Gensler has said that it is necessary to regulate DeFi more comprehensively.
On September 20th, a cryptocurrency industry summit “Mainnet 2021” was held in New York, USA, hosted by Messari, a cryptocurrency research organization. The speaker at the summit received a subpoena from the SEC. The founders of various DeFi projects and stablecoin projects have received subpoenas from the SEC. The incident made Messari founder Ryan Selkis very angry. He complained on Twitter: “SEC Chairman Gensler is very smart. He’really’ understands cryptocurrency and he wants to destroy it.”
Regulate cryptocurrency but not ban
Even though there are many big sticks to regulate the cryptocurrency field, Gensler said that the United States will not completely ban cryptocurrencies. He pointed out that the focus of the U.S. government is to ensure that the cryptocurrency industry complies with investor and consumer protection rules, anti-money laundering laws, and tax laws. This may be good news for the cryptocurrency field, that is, the United States will not eliminate the existence of cryptocurrencies, but cryptocurrencies need to comply with local financial rules.
At the end of September, Gensler reiterated that he supports futures-based Bitcoin ETFs, which will invest in futures contracts rather than the cryptocurrency itself. Federal Reserve Chairman Jerome Powell also agreed with Gensler’s view.
Gensler’s support for Bitcoin futures ETFs also contributed to the emergence of the first Bitcoin futures ETF in the United States. The ProShares Bitcoin Strategy ETF (code-named BITO) will be listed on October 19, 2021. The ETF closed up nearly 5% on the day to $41.94. According to Elisabeth Kashner, head of ETF research at FactSet, its turnover on that day was approximately US$981 million, making it the second most active ETF ever to show.
The SEC’s attempts to regulate the cryptocurrency industry have also aroused opposition. A senior Republican in the United States criticized Gary Gensler’s attempt to regulate cryptocurrency as an ultra vires act. At the same time, more defenders of cryptocurrency have also increased their opposition to several SEC regulatory proposals.
Tom Emmer, the co-chair of a group of lawmakers interested in blockchain, also said that he believes Gary Gensler’s attempt to expand the SEC’s role in regulating cryptocurrencies is ultra vires. In an interview with the Financial Times, Emmer said: “All regulators want more jurisdiction, and I cannot blame them for this. But I think Gary Gensler’s vision should become broader. Frankly speaking, positive Because of this, he has a negative impact on the opportunities that retail investors, entrepreneurs and innovators may provide, and it may have a huge negative impact.”
Hester Peirce, one of the two Republicans in the SEC, also expressed concern. She told the Financial Times earlier this year that she worried that the new regulatory measures promoted by SEC Chairman Gary Gensler would hinder innovation.
The imminent regulation of many cryptocurrency asset companies has also forced many cryptocurrency asset companies to set up a series of new lobbying organizations to debate their claims on Capitol Hill. But they expressed different opinions. Perianne Boring, chairman of the Digital Chamber of Commerce, one of the lobby groups, said: “As the industry develops and business models become more complex, the industry must engage more with legislators.”
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