In a recent incident, an old video featuring Gary Gensler, chief of the United States Securities and Exchange Commission (SEC), has taken Twitter by storm. Notably, the SEC chief can be seen commenting about the crypto industry with a very different approach.
The video taking rounds on Twitter reveals Gensler asserting that most crypto assets are commodities. Sources reveal that the video is an excerpt from the SEC chief’s lecture at a blockchain course in 2018.
At the time, Gensler was the professor of a graduate course called “Blockchain and Money” at the Massachusetts Institute of Technology (MIT). Less than five years ago, he told students that the majority of markets don’t qualify to be a security. Quoting him:
So we already know in the U.S. and in many other jurisdictions that three-quarters of the market are not ICOs or not what would be called securities.
Furthermore, Gensler explained that this non-security classification applies in the three jurisdictions that use the Howey Test (the U.S., Canada, and Taiwan.) He then explicitly states that “three-quarters of the market is non-securities. It is just a commodity, cash crypto.”
Notably, ICOs are initial coin offerings, a method that was predominantly used by crypto firms to raise money for their projects during the 2017 bull market. As the usage increased, it invited attention from the authorities as in the following bear market year there was a regulatory crackdown on them across the United States.
At the lecture, he said that the debate over whether ICOs are securities “is not particularly relevant as a legal or regulatory matter” for most of the market.
Moving forward five years, what we see today is a completely different approach from the SEC chief. Gensler in present times goes on to crack down on crypto entities claiming all crypto assets to be security except Bitcoin.
As soon as the video surfaced, the entire crypto community targeted Gensler for his hypocrisy. Notably, Coinbase’s CEO Brian Armstrong also re-tweeted the video adding an exclamatory expression, “Wow!”
The SEC under the leadership of Gensler has cracked down on pretty much everything related to digital assets, from staking to stablecoins. As many say, the agency has been carrying out a “regulation by enforcement” approach targeting major crypto entities including big-shot firms like Coinbase, Kraken, Paxos, etc.
In February, the SEC sent a Wells Notice to Paxos accusing them of selling unregistered security targeting the stablecoin BUSD. Then in March, the SEC sent another Wells Notice to Coinbase accusing them of violating federal securities laws. This also explains the overwhelming expression of the Coinbase CEO.
However, in recent times, Gensler has remained rigid regarding cryptocurrencies and has not once decided to reconsider them. Even while testifying before the lawmakers, Gensler said that the existing federal securities are sufficient to regulate the crypto industry and shifted the blame on the crypto entities for noncompliance.