The SEC frequently fires at encryption, Gary Gensler turns from a financial Jew to an iron-fisted regulator

By Joy, PANews

The first chairman of the US Securities and Exchange Commission, Joseph Kennedy (Joseph Kennedy) has a famous saying: "The US Securities and Exchange Commission wants to scare dishonest companies." Today, the approach of Chairman Gary Gensler makes encryption companies feel scared. It's not fear but loathing.

Due to the recent rampant prosecution of encryption institutions, Gensler has not only been criticized by the encryption circle, but also choked by the House of Representatives to resign. Of course, Gensler has always been indifferent to these public opinions, and still justly cited the ancient Howey test that may not be applicable to cryptocurrencies to judge many encryption projects. As the iron-fisted regulator who knows encryption best, he has repeatedly accused the encryption project of "military medals" under which there are too many "careful thoughts".

A financial Jew from Wall Street, an iron-fisted regulator who once "bloodbathed" derivatives

Like FTX founder SBF, Gensler is also Jewish, born in a Jewish family in Baltimore, Maryland, USA. Gary Gensler started his career at Goldman Sachs and has been co-head of finance. At the age of 30, he became one of the youngest partners in the firm at the time. Goldman Sachs CEO Robert Rubin joined the Clinton administration in 1993 and became Secretary of the U.S. Treasury Department in 1995. Then Gensler followed his former boss to join the U.S. Treasury Department as Assistant Secretary of Financial Markets in 1997, starting his political career.

Gensler served as a senior adviser to Hillary Clinton during her 2008 presidential campaign and advised Obama's campaign. During the Obama presidency, Gensler served as chairman of the U.S. Commodity Futures Trading Commission (CFTC) from 2009 to 2014. At that time, Gensler, who had just taken up the CFTC, was facing a situation similar to the current encryption market-the mess after the 2008 financial crisis and the derivatives market were in the wild west. However, he successfully promoted the implementation of new regulations on US derivatives regulation. As a result, the Wall Street Journal called Gensler "a tough regulator who pushed for tougher rules to govern the trillion-dollar derivatives market."

Subsequently, Gensler also served as chief financial officer for Hillary Clinton's 2016 presidential campaign. However, during the period when the Democratic Party lost Trump’s term, Gensler went to the MIT School of Economics to teach in a moment of loneliness. At that time, one of the courses he taught was blockchain and currency, and he talked about the development of Bitcoin and the impact of blockchain on the financial industry. Impact. He also served as chairman of the Maryland Financial Consumer Protection Commission, which was his dormant period for several years. With Biden in office, Gensler's political career scored twice in 2021, when he was named SEC chairman.

Gary Gensler, who taught at MIT

The relationship with FTX is ambiguous, and its downfall has become a watershed in encryption supervision

In 2021, U.S. President Joe Biden nominated Gensler to serve as the 33rd chairman of the U.S. Securities and Exchange Commission. On April 19, 2021, Gensler was confirmed for a five-year term until 2026. In June 2021, he succeeded Allison Lee, acting chairman of the SEC, and became the chairman of the new SEC. When Gensler first took office at the SEC, many encryption practitioners were delighted, believing that the encryption industry has ushered in a friendly regulator. Because just a few days before he officially took office, he also tweeted support for the "Green Crypto" (#GreenCrypto) retweet campaign and released his own "Green Laser Eye" meme, he asked netizens if they need to tweet Invite more people to retweet the "Green Crypto" campaign.

Then everyone gradually realized that it was precisely because of his understanding of encryption that he was able to strike out with more confidence. His regulatory policy on encryption was stricter than any previous SEC chairman. He hoped to carry out a campaign to "tame finance". Strengthen the regulation of the encryption market. A series of speeches by Gary Gensler emphasized the importance of investor protection and signaled that the SEC will strengthen supervision of the cryptocurrency field.

According to incomplete statistics from PANews, since Gensler took office, his work related to encryption projects has not only included multiple investigations and prosecutions, but also approved the listing of the first Bitcoin futures ETF.

• In July 2021, Circle stated that it received a subpoena for investigation from the SEC, and Circle’s listing application has also been unsuccessful.
• In September 2021, the SEC warned Coinbase not to launch lending products, otherwise it will sue Coinbase.
• In September 2021, the SEC said it was investigating Uniswap Labs, collecting information to study how users interact with the platform, and Uniswap's marketing methods. *In September 2021, Gensler called on cryptocurrency exchanges to register with the SEC in an interview, warning that if they do not, they will be hit with enforcement actions from the SEC.
• On October 19, 2021, the listing of the first Bitcoin futures ETF The ProShares Bitcoin Strategy (codenamed BITO) was approved.
• In November 2021, the SEC investigated up to 9.5% of BlockFi's interest-bearing crypto accounts and deemed them securities. Then in February 2022, BlockFi and the SEC reached a settlement, paying $50 million to the SEC.
• In December 2022, following the downfall of FTX, the SEC sued FTX and founder SBF for violating anti-fraud regulations.
• In January 2023, after Nexo was accused by the SEC of issuing and selling EIP without registration, it settled for $45 million.
• In February 2023, Kraken was accused by the SEC of illegally issuing securities, and quickly settled for $30 million.
• In February 2023, the U.S. dollar stablecoin BUSD was accused by the SEC of illegally issuing securities.
• In June 2023, sue Coinbase exchange, Binance US and its founder Changpeng Zhao.

However, his supervision of cryptocurrency has intensified since the fall of FTX, from investigation to formal prosecution. FTX’s thunderstorm has become a watershed event in US encryption regulation.

PANews previously wrote the article "FTX Ended: A Deep Dive into SBF's "Political Business Experience" and the Private Relationship of Regulatory Executives" which mentioned the relationship between Gensler and FTX. After Gensler returned to the political arena, his old CFTC departments have gone to FTX.US to take up positions. For example, Mark Wetjen, the former acting head of CFTC, will be hired as FTX US Policy and Regulation Director in 2021; FTX US General Counsel Ryne Miller was also Gensler's personal counsel at the CFTC. This has also triggered public speculation about the deep relationship between FTX and Gensler. It is worth mentioning that the father of Caroline, SBF's ex-girlfriend and Alameda's CEO, was a professor and director of economics at MIT, and Gensler's former boss when he was teaching at MIT. U.S. Congressman Tom Emmer tweeted in November last year: "My office has received reports that SEC Chairman Gary Gensler is helping SBF and FTX exploit legal loopholes to gain regulatory monopoly status."

Gensler's close contacts with FTX's executive team have also become a stain on his political career, and he has been caught by competitors. After FTX collapsed, the Republican Party launched a fierce criticism, Congressman Warren Davidson introduced a new legislation, calling for the removal of Gensler and the executive director of the SEC to fill the vacancy. House Financial Services Committee Chairman Patrick McHenry said in his tweet that the SEC’s crackdown on cryptocurrencies had failed to bring stability to the digital asset market, writing: “Your practices are driving innovation overseas and jeopardizing U.S. competitiveness.”

Implementation of encryption "Night of Long Knives", Gensler's regulatory views change and remain unchanged

Gary Gensler's attitude towards cryptocurrencies has a sharp contrast before and after he took office, but he has always supported Bitcoin, but he labeled cryptocurrencies as securities.

At a blockchain business summit held in 2018, Gary Gensler argued that blockchain technology has real potential to change the financial world; while there are many technical and business challenges to be overcome, this innovation could reduce the cost of the financial system and risk. He is a blockchain optimist and wants to see the technology succeed.

A new video shows Securities and Exchange Commission (SEC) Chairman Gary Gensler telling institutional investors in 2018 that BTC, ETH, LTC and BCH, which accounted for 75% of the crypto market at the time, were not securities, Forbes reported. . The comments came at a time when cryptocurrencies were in the midst of a bull market and a little over two years before Gensler was named SEC chairman. The video, from a crypto-themed institutional investor event hosted by Bloomberg and Fidelity in 2018, contradicts his recent statement that he now believes that all cryptocurrencies other than Bitcoin All are securities. Related reading: "One Picture to understand the tokens that have been recognized as securities by the US SEC"

At the U.S. Congressional hearing in July 2018, some lawmakers said that cryptocurrency projects are Ponzi schemes with no value. Gensler also retorted that gold has no value, and its value is also the economic value given to it by people. He also believes that cryptocurrencies can be regarded as digital rare metals with certain value.

While teaching at MIT, Gensler also encouraged students to participate in Crypto. Manta Network co-founder and chief operating officer Kenny said on Twitter that he was a student in Gensler's class. Gary Gensler sent his report on BNB to Changpeng Zhao and encouraged him to participate in encryption more. He also had in-depth exchanges and discussions with Gensler on encryption projects in the summer of 2019. The claim appears to corroborate previous statements by Binance lawyers, in which lawyers for Binance’s two law firms, Gibson Dunn and Latham & Watkins, claimed that Gary Gensler had offered to serve as an advisor to Binance’s parent company in 2019. Before Gensler began going after Binance, he had been trying to “crowd” the company, lawyers said. Because of Gensler’s relationship with Changpeng Zhao, Binance’s lawyers said they had asked Gensler to recuse himself from any action involving the company.

But after taking office as the chairman of the SEC, Gensler has a more critical attitude towards encryption. For example, he gave a speech at the SEC's annual "SEC Speaks" event in 2022, focusing on the regulation of the cryptocurrency market. "There are nearly 10,000 encrypted tokens in the current encrypted market. I believe that most of them are securities, so the issuance and sale of these security-type encrypted tokens will be regulated by securities laws... I have asked the US Securities Exchange Commission staff work directly with crypto project entrepreneurs to register and regulate, where appropriate, the tokens they create as securities.  …Given that many crypto tokens fall under the category of securities, this means that many crypto Intermediaries are doing securities trading acquisitions, so they have to register with the SEC in some capacity.” His remarks on encryption on other occasions are also the same argument.

In February of this year, after the SEC accused BUSD, some encrypted KOLs said that the US Securities and Exchange Commission is actually implementing its own encrypted version of "Night of the Long Knives". The Night of the Long Knives refers to the liquidation operation that took place in Nazi Germany from June 30 to July 2, 1934. Hitler used this purge operation to eliminate his political opponents and strengthen his control over the army.

Undoubtedly, Gensler's cleansing of the encryption circle is entering its climax.