Gary Gensler, the new chairman of the Securities and Exchange Commission (SEC), validated the invention and legacy of bitcoin in his first speech on the subject on August 3rd. Gensler, a global economics consultant and senior adviser on the MIT Digital Currency Initiative, said: “… I came to believe that while there were a lot of expressions that pretended to be cryptography, Nakamoto’s innovation is real. In addition, it has been and could continue to be a catalyst for change in the fields of finance and money. ”
Gensler is well known in the financial industry during his period from 2009 to 2014 as chairman of the Markets and Futures Trading Commission (CFTC), where he developed derivative regulation at the agency following the global financial crisis. As a successful investment banker at Goldman Sachs for two decades, Gensler had been a key member of Biden’s transition team, where he helped chart plans for U.S. financial regulators.
The speech at the Aspen Security Institute came just days after the Senate drew national attention to the debate over the IRS’s fiscal reporting requirements for digital currencies and a new draft law in the U.S. House of Representatives. A few days after Gensler’s statements about bitcoin and the industry, an SEC enforcement action against Poloniex for operating as an “unregulated exchange of digital assets” made it clear that there was a new sheriff in the city of cypherpunks.
Guess what, Nakamoto
As a leading leader in the financial services industry, Gensler consolidated in his speech the critical importance of bitcoin for the future implications of global financial markets. Demonstrating his deep understanding of both technology and the historical context, Gensler proclaimed, “Nakamoto had solved two riddles that had haunted these cryptographers and other technology experts for a couple of decades: first, how to move something of value on the Internet without central intermediary; and, related, how to avoid the “double spending” of this valuable digital testimony. “
Gensler talked about what he considered to be Nakamoto’s main goal. “At its core, Nakamoto was trying to create a private form of money without a central intermediary, such as a central bank or commercial banks,” Gensler said. However, he did not see Bitcoin reaching the standard of money as a unit of account, store of value, or medium of exchange. “Mainly, cryptographic assets provide digital and scarce vehicles for speculative investments. Therefore, in this sense, it can be said that they are a highly speculative value reserve ”.
Gensler stated that it was “technology neutral” with respect to cryptographic assets, and made it clear that it is anything but “public policy neutral” and very much in tune with investor protection. Describing the new asset class, Gensler warned that the industry was “… full of fraud, scams and abuse in certain applications. There are a lot of advertising expressions about the operation of cryptographic assets. ”Most importantly, it focused on the issue of whether investors could not obtain“ rigorous, balanced, and complete information. ”Say it without funnels, Gensler said, “I’m worried a lot of people will get hurt.”
Do you feel lucky Cypherpunk?
Dirty Harry, a famous fictional detective played by Clint Eastwood in the 1970s, teases an injured suspect by famously asking if he “felt lucky, punk?” on going to get his weapon. Eastwood’s character began by wondering, “Did he shoot six shots or just five?” Now, to tell you the truth, I have forgotten myself in all this illusion ”.
Loss of tokens listing a cryptographic asset exchange can be a similar type of error based on Gensler’s speech. “While the legal status of each witness depends on its own facts and circumstances, the probability is very remote that, with 50 or 100 tokens, any platform has zero values,” Gensler said. He doubled that statement in the question and answer period that the moderator had said he “exploded” when he said again, “… when you get to 100 tokens, it’s very unlikely that every 50, or 100, you don’t they do it “. don’t pass … ”
The moderator commented that the questions and answers had exploded with questions based on these observations; however, Gensler noted his agreement with former SEC President Jay Clayton, even though he was part of the previous administration. While indicating that “regulation by enforcement” would continue in the markets, Gensler also encouraged platforms to “enter and register” with the SEC.
The way forward: does the digital barbed wire reach the wild west of trade?
Gensler’s comments that “regulation by application” would continue were quickly followed by the “Poloniex order,” an SEC press release citing an exchange with 75 tokens as an exchange of assets. unregistered digital cameras “. While this was not unexpected in the case of this former exchange that was established with the SEC for more than $ 10 million, the execution order was a signal to the market that stock exchanges located similarly they could expect the same.
Exchanges that are “bitcoin only” may benefit, while exchanges that include 100 or more tokens will need to recognize the danger of the SEC declaring them an “exchange of unregistered digital assets” to trade “securities.” digital assets “. It is unclear how long Gensler’s “open door” policy for exchanges to discuss how an exchange can be registered as a stock exchange with the SEC or seek an exemption, but the timing of the Poloniex order did not go. make no mistake that Gensler was not “neutral public policy” and protects investors.
Where does this leave Bitcoin?
Cemented into what will likely be a crackdown on stock exchanges and digital asset tokens over Gensler’s next five years in the SEC, it is likely to repeat what it did at the CFTC for derivatives. Considering that the SEC is primarily responsible for overseeing the industry, the cryptocurrency industry will have to fight the impact of investors, whether or not any digital asset is considered collateral.
One of the areas Gensler pointed to comes from the risk of environmental, social and corporate governance (ESG) or climate change. In his questions and answers, Gensler said, “Bitcoin mining happens largely in China. A lot of things are starting to change … but the question is, is it done with a lot of electricity through dirty coal in theory and also with work tests. In my opinion, the SEC has rightly put a lot of emphasis on climate change and disclosures. ”Gensler then asked a question about whether SEC-registered companies that had Bitcoin should publicly disclose it to the SEC. Although he said he reserved comments for SEC staff preparing a draft language, he still raised the question, “Do you want to require companies, for example, to disclose whether they have cryptocurrencies that have a large environmental impact?” ”
The legacy of Bitcoin, if Gensler continues with the policies it established, will likely be enshrined as an innovative invention that has come to stay and the prospects look good for “bitcoin-only” exchanges that are conservative in their approach. However, regular updates and educational materials that can be provided to the SEC on developments around renewable energy and other innovations by bitcoin miners that achieve carbon neutrality will be essential to assist the SEC’s decisions on disclosures about climate change and the type of reports that may be required by public companies.
This is a guest post by Jason Brett. The views expressed are wholly their own and do not necessarily reflect those of BTC, Inc. o Bitcoin Magazine.