Why does Gary Gensler, from a finance Jew to an iron-fisted regulator, repeatedly accuse cryptocurrency projects?

Author: Joy, BlockingNews

Joseph Kennedy, the first chairman of the US Securities and Exchange Commission, had a famous saying: “The SEC should make dishonest companies feel fear.” But today, the actions of current chairman Gary Gensler have not made crypto companies feel fear, but disgust. Due to the recent widespread prosecution of crypto organizations, Gensler has not only been criticized by the crypto community, but has also been challenged by the House of Representatives to step down. Of course, Gensler has never cared about these opinions and still uses the old Howey test, which may not be applicable to cryptocurrencies, to judge many crypto projects with righteousness. As the toughest regulator who understands crypto the most, he repeatedly accuses the “medals” of crypto projects of hiding too many “ideas.”

Wall Street’s Jewish financial regulator, who once “bloodwashed” derivatives

Like the founder of FTX, SBF, Gensler is also a Jew, born in a Jewish family in Baltimore, Maryland, USA. Gary Gensler’s career started at Goldman Sachs and he worked as a co-head of finance until he became one of the youngest partners in the company at the age of 30. Robert Rubin, CEO of Goldman Sachs, joined the Clinton administration in 1993 and became the US Treasury Secretary in 1995. Gensler then followed his former boss to join the US Treasury in 1997 as assistant secretary of the financial markets, starting his political career.

During Hillary Clinton’s presidential campaign in 2008, Gensler served as her senior advisor and provided advice for Obama’s campaign. During Obama’s presidency, Gensler served as the chairman of the US Commodity Futures Trading Commission (CFTC) from 2009 to 2014. At that time, Gensler, who had just taken office at the CFTC, faced a situation similar to the current crypto market-the aftermath of the 2008 financial crisis and the wild west of the derivatives market. But he successfully pushed for the implementation of new regulations for US derivative supervision. Therefore, The Wall Street Journal called Gensler “a tough regulator who pushed for stricter rules to manage the derivatives market worth trillions of dollars.”

Later, Gensler also served as the Chief Financial Officer for Hillary Clinton’s 2016 presidential campaign. But after the Democratic Party lost to Trump, Gensler went to teach at MIT’s economics department, where he taught a course on blockchain and currency, focusing on the development of Bitcoin and the impact of blockchain on the financial industry. He also served as the chairman of the Maryland Financial Consumer Protection Commission, marking a period of hibernation for him. With Biden taking office, Gensler’s political career resumed in 2021, when he was appointed SEC chairman.

Gary Gensler, who once taught at MIT

Ambiguous relationship with FTX, his downfall marks a watershed moment for cryptocurrency regulation

In 2021, US President Biden nominated Gensler as the 33rd Chairman of the US Securities and Exchange Commission. On April 19, 2021, Gensler was confirmed for a term of 5 years, until 2026. In June 2021, he succeeded SEC Acting Chairman Allison Lee to become the new SEC Chairman. When Gensler first took over the SEC, many cryptocurrency practitioners were delighted, believing that the industry had found a friendly regulator. Just a few days before he officially took office, he called for support for the “Green Crypto” (#GreenCrypto) Retweet campaign on Twitter and issued his own “Green Laser Eye” meme, asking netizens if they needed to invite more people to Retweet the “Green Crypto” campaign on Twitter.

It was later revealed that it was precisely because he understood cryptocurrency that he was able to strike with confidence. His regulatory policies on cryptocurrency are more stringent than those of any previous SEC chairman, and he hopes to launch a “taming finance” campaign to strengthen the regulation of the cryptocurrency market. Gary Gensler’s series of statements emphasize the importance of investor protection and signal that the SEC will strengthen its supervision of the cryptocurrency field.

According to BlockingNews’s incomplete statistics, since Gensler took office, his work related to cryptocurrency projects has not only involved multiple investigations and prosecutions, but also approved the first Bitcoin futures ETF to be listed.

  • In July 2021, Circle stated that it had received a subpoena from the SEC and its application for listing has been unsuccessful.

  • In September 2021, the SEC warned Coinbase not to launch lending products or it will face lawsuit by the SEC.

  • In September 2021, the SEC stated that it is investigating Uniswap Labs, gathering information on how users interact with the platform and Uniswap’s marketing methods.

  • In September 2021, Gensler called on crypto exchanges to register with the SEC and warned that they will face enforcement action from the SEC if they do not.

  • On October 19, 2021, the first Bitcoin futures ETF, The ProShares Bitcoin Strategy (code BITO), was approved for listing.

  • In November 2021, the SEC investigated BlockFi’s interest-bearing crypto accounts up to 9.5% and deemed them securities. Later in February 2022, BlockFi reached a settlement with the SEC, paying $50 million.

  • After the collapse of FTX, the SEC sued FTX and founder SBF for violating anti-fraud provisions in December 2022.

  • In January 2023, Nexo was accused by the SEC of issuing and selling EIPs without registration and 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 stablecoin BUSD was accused by the SEC of illegally issuing securities.

  • In June 2023, Coinbase exchange and Binance US and its founder Changpeng Zhao were sued.

However, his regulation of cryptocurrencies became more stringent after the collapse of FTX, shifting from investigation to formal prosecution. The FTX collapse became a watershed event for US crypto regulation.

After Gensler returned to the political stage, many of his former colleagues at the CFTC went to work for FTX.US, such as Mark Wetjen, former acting head of the CFTC, who was hired as FTX US’s head of policy and regulation in 2021; and Ryne Miller, FTX US’s general counsel, who was Gensler’s personal legal adviser during his time at the CFTC. This has also sparked speculation about the deep relationship between FTX and Gensler. It is worth mentioning that Caroline, the former girlfriend of SBF and CEO of Alameda, has a father who is an economics professor and director at MIT and was Gensler’s former boss when he taught at MIT. US Congressman Tom Emmer tweeted last November that his office had received reports that SEC Chairman Gary Gensler was helping SBF and FTX exploit legal loopholes to gain regulatory monopolies.

Gensler’s close relationship with the FTX executive team has also become a stain on his political career, which has been seized upon by his competitors. After FTX’s collapse, the Republican Party launched fierce criticism, with Representative Warren Davidson introducing new legislation to remove Gensler and have the executive director of the SEC fill the vacancy. Patrick McHenry, chairman of the House Financial Services Committee, tweeted that the SEC’s crackdown on cryptocurrencies failed to bring stability to the digital asset market, writing, “Your actions are driving innovation overseas and endangering America’s competitiveness.”

Gensler’s changing and unchanging regulatory views on the implementation of the encryption “long night”

Gary Gensler’s attitude towards cryptocurrencies has a clear contrast before and after taking office, but he has always supported Bitcoin, but he has crowned cryptocurrencies with the name of securities.

At a blockchain business summit held in 2018, Gary Gensler believed that blockchain technology has the real potential to change the financial world; although there are still many technical and business challenges to overcome, this innovation can reduce the cost and risk of the financial system. He is an optimist about blockchain and hopes to see this technology succeed.

According to Forbes, a new video shows that Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), told institutional investors in 2018 that BTC, ETH, LTC and BCH were not securities, and these tokens accounted for 75% of the cryptocurrency market at the time. At the time of this statement, cryptocurrencies were in a bull market, more than two years before Gensler was appointed chairman of the US Securities and Exchange Commission. This video comes from a cryptocurrency-themed institutional investor event hosted by Bloomberg and Fidelity in 2018, which contradicts his recent statements that all cryptocurrencies other than Bitcoin are securities.

At a US congressional hearing in July 2018, some members of Congress claimed that cryptocurrency projects were worthless Ponzi schemes, but Gensler argued that gold was also worthless and that its value was also the economic value given to it by people. He also believes that cryptocurrencies can be seen as digitized rare metals with certain values.

While teaching at MIT, Gensler also encouraged students to get involved in crypto. Kenny, co-founder and COO of Manta Network, tweeted that he was a student in Gensler’s class and that Gensler shared his report on BNB with CZ, encouraging him to get more involved in crypto. He also had in-depth conversations about crypto projects with Gensler in the summer of 2019. This seems to confirm Binance’s lawyers’ previous statement that Gibson Dunn and Latham & Watkins, Binance’s two law firms, claimed that Gary Gensler had voluntarily offered to serve as an adviser to Binance’s parent company in 2019. The lawyers claimed that Gensler had been trying to cozy up to the company before he began investigating Binance. Given Gensler’s relationship with CZ, Binance’s lawyers have requested that Gensler recuse himself from any action involving the company.

However, after taking over as SEC chairman, Gensler has been more critical of crypto. For example, he spoke at the SEC’s annual SEC Speaks event in 2022 and emphasized the regulation of the cryptocurrency market. “There are nearly 10,000 crypto tokens in the current crypto market, and I believe that the vast majority of them are securities, so the issuance and sale of these security tokens will be subject to securities law regulation. … I have instructed staff at the U.S. Securities and Exchange Commission to work directly with crypto project entrepreneurs to register and regulate the tokens they create as securities where appropriate….Given that many crypto tokens fall under the category of securities, this means that many crypto intermediaries are engaged in securities trading, so they must be registered with the U.S. Securities and Exchange Commission in some capacity.” His comments on crypto on other occasions have been similar.

In February of this year, after the SEC charged BUSD, some crypto KOLs said that the U.S. Securities and Exchange Commission is actually implementing its own crypto version of the “Night of the Long Knives.” The Night of the Long Knives refers to a purge that took place in Nazi Germany from June 30 to July 2, 1934, in which Hitler used the purge to eliminate his political opponents and strengthen his control over the military.

Undoubtedly, Gensler’s big cleanup of the crypto industry is entering a climax stage.

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