Authored by: How, Odaily Planet Daily
When it comes to the “public enemy” of the crypto world, many people immediately think of the Securities and Exchange Commission (SEC) in the United States. Each time a project or notable figure is targeted by the SEC, it leads to a downturn in the market, making SEC Chairman Gary Gensler notorious.
Having served as SEC Chairman since April 2021, Gary Gensler’s term is more than halfway through. During his tenure, he has frequently taken aim at the crypto industry, making statements such as “the majority of tokens in the crypto market are securities, so issuing and selling these security-type crypto tokens will be regulated by securities laws.” He has also led cases against numerous well-known crypto companies such as Binance, Coinbase, Kraken, and FTX.
All signs indicate that Gary Gensler seems to have a bias against the crypto industry, but is the reality really as everyone “sees” it? Odaily Planet Daily will introduce readers to SEC Chairman Gary Gensler from a fresh perspective.
A former Goldman Sachs employee turned crypto “iron-fisted instructor,” Gary Gensler’s work experience: Iron-fisted is his style of doing things
Gensler was born into a Jewish family and grew up with a strong influence in finance. After graduating, he entered the Wall Street giant Goldman Sachs and became one of the youngest partners at the age of 30, eventually spending 18 youthful years at Goldman Sachs.
In 1995, Goldman Sachs CEO Robert Rubin became the US Treasury Secretary, and Gensler followed Rubin to join the US Treasury Department as Assistant Secretary of Financial Markets, officially beginning his career.
Gensler has always been a staunch Democrat, providing advice for Obama’s presidential campaign in 2008 and later serving as Chairman of the US Commodity Futures Trading Commission (CFTC) during Obama’s presidency. At that time, in the aftermath of the financial crisis, the derivatives market was in a state of disarray, and Gensler, starting with regulation, continuously introduced new rules to help rebuild order in the US derivatives market. As a result, Gensler was known as “one of the main reformers after the financial crisis.”
After Obama’s term, Gensler also served as Chief Financial Officer for Hillary’s 2016 presidential campaign. With Trump’s victory, Gensler’s career prospects dimmed, and he went to work at the Massachusetts Institute of Technology (MIT), teaching a course on “Blockchain and Money.”
During his teaching tenure, Gensler encouraged students to engage in the blockchain industry and praised blockchain as a life-changing technology using Algorand as an example. “Perhaps in 5 years, you can build Uber or Lyft on the blockchain… At that time, the blockchain will have a certain strength in performance, like Silvio Micali’s Algorand. He is a Turing Award winner from MIT, and we have worked together. Silvio has great technology and performance, you can develop Uber on top of it.”
In 2020, Biden won the election, and Gensler was nominated as SEC Chairman by Biden, starting his entanglement with the crypto industry.
From Gensler’s work experience, it is easy to see that his tough regulatory style stems from his time as CFTC Chairman. Perhaps in his mind, the current crypto industry is similar to the derivatives market after the financial crisis. But the author believes that his love for the crypto industry during his teaching tenure at MIT was not a disguise. Such contradictory experiences in Gensler have undoubtedly led to misunderstandings from the public.
Counting the enforcement actions taken by Gensler during his tenure against the crypto industry
From 2021 to 2024, the SEC led by Gensler has taken many significant enforcement actions against the crypto industry. Here are some detailed cases:
Ripple Labs: Case Overview: In December 2020, the SEC filed a lawsuit against Ripple Labs, accusing it of conducting unregistered securities offerings through the sale of XRP tokens. The case continued in 2021, with Ripple arguing that XRP is not a security. Outcome: In a July 2023 court ruling, Ripple achieved a certain victory, with some actions deemed not securities, but violations still existed. The SEC then requested Ripple to pay nearly $2 billion in fines, with the final judgment still pending.
Coinbase: Case Overview: In September 2021, the SEC warned Coinbase that its planned launch of lending products may constitute unregistered securities and threatened to sue Coinbase. Outcome: Coinbase canceled the launch of the lending product and continued to cooperate with the SEC to ensure the compliance of its other products.
BitConnect: Case Overview: The SEC filed a lawsuit against BitConnect and its founder, accusing them of operating a Ponzi scheme worth over $2 billion. Outcome: Several top executives of BitConnect were sued, and the case is still ongoing.
BlockFi: Case Overview: The SEC accused BlockFi of offering unregistered crypto lending products, which constituted securities. Outcome: BlockFi agreed to pay a $100 million fine to settle, with $50 million paid to the SEC and another $50 million paid to state regulators.
Kraken: Case Overview: The SEC accused Kraken’s staking program of constituting unregistered securities. Outcome: Kraken agreed to pay a $30 million fine to settle.
FTX and SBF (Sam Bankman-Fried): Case Overview: In November 2022, FTX faced a liquidity crisis, exposing financial management and risk control issues. In 2023, SBF was accused of fraud and misappropriation of funds. Outcome: SBF faces multiple legal actions, and the case is still ongoing.
Binance and CZ (Changpeng Zhao): Case Overview: The SEC investigated Binance and its founder CZ, accusing them of defrauding investors and operating an unregistered exchange business. Outcome: Binance agreed to forfeit $25 billion and pay a $18 billion criminal fine, totaling $43 billion. CZ was sentenced to four months in prison.
Genesis and Gemini: Case Overview: The SEC filed lawsuits against the crypto lending platform Genesis and the crypto exchange Gemini, accusing them of attracting investors through unregistered crypto lending products, violating securities laws. Outcome: The cases are still ongoing.
Terraform Labs and Do Kwon: Case Overview: The SEC filed a lawsuit against Terraform Labs and its founder Do Kwon, accusing them of defrauding investors and misleading the public, involving the issuance and sale of unregistered securities. Outcome: The case is still under trial, and Do Kwon and Terraform Labs face serious legal consequences.
Looking at the cases mentioned above, the SEC led by Gensler has shown almost zero tolerance for staking and lending products launched by crypto exchanges, followed by accountability for related black swan events, and finally, cases related to anti-fraud and anti-money laundering. These three types of enforcement actions are easier for the crypto industry to accept and are beneficial to the industry’s development. However, the SEC’s judgment on whether tokens are “securities” has raised questions from the public.
Currently, the SEC’s judgment standard is based on the Howey Test, which was established in a case titled “SEC v. W.J. Howey Co.” by the US Supreme Court in 1936. The main principles of the Howey Test are that if a transaction meets all of the following conditions, it will be considered a securities offering: investors invest money or other fungible assets; investors’ investments are in a common enterprise; investors expect to rely on the efforts of a third party (usually a company or other entity) to obtain investment returns; investors’ returns primarily depend on the efforts of the third party.
These four conditions typically need to be met in full, but tokens are more complex and may meet these conditions in some activities but not in others, leading to an awkward situation of “he said she said.” Gensler has thus attracted ridicule from the crypto industry.
Although Gensler is vilified, he still promotes the integration of the crypto industry into mainstream finance
Most views on Gensler in the crypto industry are negative, with many believing that he is gradually ruining the crypto industry and similar criticisms being common. However, does this perspective hold true? In the author’s view, such views are biased. Looking back at the 15-year history of the entire crypto industry, the promotion of each SEC to the crypto industry is not as significant as the positive impact Gensler has had in his three years in office.
Reviewing the major events that have had a positive impact on the crypto industry since Gensler took office in April 2021. In October 2021, the first Bitcoin futures ETF was launched. In January 2024, the first Bitcoin spot ETF was launched. In May 2024, the 19b-4 filing for an Ethereum spot ETF was approved. (Several institutions have indicated that the Ethereum spot ETF product will be launched this month)
These three major events have significant implications for the crypto industry.
The author gives a personal example of being warned by people around him when mentioning the crypto, virtual currency, and Bitcoin-related terms in the past, being told to “find a proper industry early on as this industry has problems.” The author could only respond with a smile. After all, it was difficult to argue based on the previous attitudes of various parties and the current state of the industry. However, this year, when discussing such issues, people around him can think of the US launching a Bitcoin spot ETF and Hong Kong’s positive attitude towards Web3, asking about industry-related developments and not hesitating to discuss related projects.
From this experience, the approval of crypto ETFs by the SEC is a stamp of approval for the crypto industry to formally enter the mainstream world, presenting the industry in an official capacity globally. Just based on this, Gensler has already secured a place in the history of the crypto industry.
Some may argue that even if another person were to become the SEC Chairman, given the current trend, they would also approve crypto ETFs. But isn’t this viewpoint just hindsight? How the current trend has formed and whether the role of the SEC in approving crypto ETFs is underestimated cannot be measured. However, the fact that mainstream funds can enter the crypto industry, based on security, is more likely to trust the security brought by national-level endorsements compared to such viewpoints.
While most people believe that the SEC led by Gensler has also brought some negative impact on the crypto industry, especially in terms of market downturns and the development of related projects. However, looking at the SEC’s enforcement actions, some are black swan events, such as FTX, BitConnect, etc., which are bound to cause market fluctuations, and most are issues related to the determination of security-type tokens. Indirectly, this also shows that the mainstream world is trying to establish a framework for the crypto industry. Although the final determination of the framework is still inconclusive, this is also the inevitable path that Gensler and the SEC are actively trying.
As for the short-term market fluctuations that will be smoothed over by time, it is ultimately just a small fluctuation in market trends. However, the crypto ETFs approved by the SEC in recent years will leave a brilliant mark in the history of the industry.
Overall, while Gensler may have his factions, private interests, external pressures, or even benefits, the author is more inclined to believe that he is finding a way to integrate the crypto world into the mainstream world in his own way.
