- The recent regulatory actions by the SEC, led by Chair Gary Gensler, raise questions about whether the agency is protecting Wall Street incumbents rather than American investors.
- Examples include the SEC’s lawsuit against Coinbase, the refusal to approve a Bitcoin ETF, and the imposition of strict rules that favor established financial institutions.
Recent regulatory actions by the Securities and Exchange Commission (SEC), under the leadership of Chair Gary Gensler, have sparked concerns about the agency’s priorities and its potential bias towards protecting Wall Street incumbents rather than American investors. While some enforcement actions in the crypto industry may be warranted, a closer examination reveals a pattern that suggests the SEC is more focused on shielding the financial services industry from disruption.
One notable example is the SEC’s massive lawsuit against Coinbase, a company widely regarded as one of the “good guys” in crypto. With a client list that includes major asset managers, Fortune 100 companies, and even the U.S. government itself, Coinbase has maintained a reputation for integrity and compliance. Yet, the SEC’s lawsuit, spanning 100 pages and filled with contradictions, raises questions about the agency’s intentions. The lack of clarity on whether Ether (ETH) is classified as a security despite Gensler’s repeated statements further adds to the uncertainty.
Gensler’s extensive background in blockchain and digital currencies, including teaching at MIT’s Digital Currency Initiative, raises even more perplexing questions. How did he transition from being knowledgeable about the potential of blockchain technology to expressing skepticism about the need for crypto? This shift in stance, coupled with the SEC’s regulatory approach, suggests that the agency may be more interested in safeguarding the interests of Wall Street incumbents than protecting American investors.
Several actions by the SEC reinforce this suspicion. The agency’s refusal to approve a Bitcoin exchange-traded fund (ETF) in the U.S., citing concerns about unregulated markets, appears inconsistent when considering its approval of futures-backed ETFs tied to those same markets. This defense seems to benefit established players like the Chicago Mercantile Exchange and related brokers.
Furthermore, the SEC’s designation of stablecoins as securities undermines their utility as payment products and primarily serves the interests of legacy banks and centralized payment providers. The agency’s insistence on applying expensive registration regimes to crypto startups restricts their ability to raise funds and stifles innovation. Additionally, attempting to fit digital assets into existing regulatory frameworks designed for traditional securities limits their potential and favors incumbents with the necessary licenses.
These regulatory actions create significant barriers for startups and decentralized projects, effectively protecting the status quo and solidifying incumbents’ positions. Interestingly, other SEC commissioners and regulators within the U.S. hold different views, highlighting the lack of consensus within the agency.
The reluctance to embrace legislative clarity and the reliance on decades-old securities laws and tests demonstrate the SEC’s resistance to adapting to new technologies and global trends. This approach is not shared by regulators in other countries who have embraced innovation in the financial sector.
As Chair Gensler’s views and regulatory approach evolve, it raises valid concerns about whose interests the SEC is truly protecting. The growing disconnect between the agency’s actions and the potential of blockchain technology to transform finance calls for a thorough examination of its motives and priorities to ensure the best outcomes for both Wall Street and American investors.