Gary Gensler, the ever-watchful guardian of the U.S. crypto industry, seems to be a regular at conferences and interviews these days. On September 26, Gensler made yet another appearance at the U.S. Treasury Market Conference, where he reminded everyone about a proposed rule change that could also shake up the world of DeFi. Not stopping there, the SEC, under his leadership, continues its quest to redefine "exchange" and alternative trading systems. Later that same day, Gensler went on CNBC to chat about the state of crypto regulation, share his thoughts on Bitcoin, and drop a few hints about the future of the crypto market.
More: Gensler vs. Behnam: Dueling Approaches to Crypto Regulation
Gensler’s Bitcoin Stance
During his Thursday interview with CNBC, Gensler once again clarifying that Bitcoin (BTC) "is not a security." However, he doubled down on his stance that regulatory clarity does, in fact, exist for the crypto space.
Innovation and investor protection are complementary.
— Gary Gensler (@GaryGensler) September 26, 2024
I was happy to join @SquawkCNBC this morning to discuss the capital markets.
Watch: https://t.co/iAO9hwZtpp
When it comes to Bitcoin, both my predecessor and I have said it’s not a security. Now, you can actually express that view — by buying it through exchange-traded products.
Beyond Bitcoin, Gensler argued that the overwhelming majority of other tokens meet the legal definition of securities, which places them under the SEC's jurisdiction.
This position remains unchanged despite pushback from the industry, lawsuits against the SEC, and a recent two-hour grilling the agency endured during a Congressional hearing titled "Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Asset."
Gensler also confessed he doesn’t know where Bitcoin will be in 20 years, but he does foresee "a trust issue" brewing in the space, which he claims is already present due to "so many bad actors, scammers."
Just look at the so-called luminaries in crypto from only two years ago. Some of them are in prison now — and I’m not just talking about SBF... There have been tens of billions of dollars in losses, bankruptcies, etc. What innovative sector in America can survive without building trust in the space, without investor or consumer protections?
Changes That Crypto Exchanges Aren't Exactly Thrilled About
In a proposal dating back to 2022, the SEC aimed to broaden registration requirements for platforms that acted as market makers for government securities. Initially, decentralized exchanges (DEX) were off the radar, but as Coin Center pointed out, by including communication protocol systems under the definition of an exchange, the SEC could expect DEXs to register with it. Eventually, the SEC made it crystal clear, they fully intended to rope in decentralized finance (DeFi) with this proposal.
The original version hinted that other types of exchange platforms would also fall under the new rules. When the proposal resurfaced a year later, a new section explicitly targeted DeFi.
"This update will close the regulatory gap between platforms," Gensler said.
Unsurprisingly, Coinbase fired back with a letter to the SEC, taking aim at the proposed amendments to the definition of a national securities exchange.
According to Coinbase's Chief Legal Officer, Paul Grewal, the SEC doesn’t have the necessary information to perform a proper cost-benefit analysis and is relying on what he called "irrational arguments." He suggested that the SEC should scrap the proposal and start over.
Today @coinbase submitted another set of concerns with @SECgov over the agency’s proposal to expand the definition of “exchange.” In short, the SEC’s proposal lacks critical analysis, rests on irrational assumptions, fails to show that there is any problem in need of regulation,…
— paulgrewal.eth (@iampaulgrewal) August 12, 2024
The Blockchain Association and Republican members of the House Financial Services Committee also filed comments criticizing the proposal.
Abimbola Adu
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