Gary Gensler, the current chairman of the Securities Exchange Commission (SEC), has had a turbulent relationship with crypto assets so far this year.
But with cryptocurrency firmly off the SEC’s 2021 regulatory agenda, many are wondering what policies Gensler might be cooking up as the industry braces itself for next year.
This comes as the 64-year-old seemed to threaten to flex the SEC’s muscles in tackling the industry.
Some of the crypto community assume that Gensler is a dinosaur with little or no understanding of cryptocurrencies. This, however, couldn’t be further from the truth.
Before the start of his stint at the SEC, Gensler was responsible for teaching a lecture series titled Blockchain and Money at the Massachusetts Institute of Technology (MIT) in 2018-19.
With the entire lecture series recently made available to the public, Coin Rivet took a deep dive to look for clues about Gensler’s regulatory ideas for the crypto industry.
Inside the head of Gary Gensler
In the lecture series, Gensler seeks to paint a narrative of an emergent industry transitioning from its early stages into the first real threads of an established industry.
Describing the state of the the regulatory outlook for crypto assets back in 2018 he explained they were largely safe from classification as securities.
“In terms of market value, probably three quarters of this space has already been determined by the Securities and Exchange Commission not to be a security,” he said.
“Bitcoin’s 54%, Ether’s about 15 points or something like that. So you’re all of a sudden up to about 70 points.
“So about three quarters of the market value right now is what one might call a cash, or a commodity, but not a security in this world”.
This is the point at which regulations come into play and, somewhat surprisingly, he argues this is grounded in the wants of the bigger players in the crypto industry.
“Sometimes, actually, institutions want to be regulated over time,” he explained.
“Because it creates barriers to entry. It’s usually not in an early stage. But later on, it’s actually the incumbents that often… it creates some barriers to entry and they collect some economic rents.
ICOs = Securities
Governments face a very difficult decision on how to approach regulating such a promising new industry.
“No government wants to shrink their tax base,” he pointed out.
The absolute explosion of ICOs and NFTs throughout the year have driven forward an urgency for regulation and, amid this, ICOs seem to draw specific fire in Gensler’s lectures.
“Securities are when there is an issuer,” he said.
“This initial coin offering market is probably mostly securities.
“That person raising money knows more information than the person investing, they probably always will. So you get to ‘what’s the fair exchange of information?’”
And this led him to earnestly explain the position of every financial regulator: “Authorities need to decide – are you going to isolate this world, regulate it, integrate it?”
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