David Ignatius Archives

Come on, Gary Gensler didn’t threaten the industry. Of course he didn’t, but… maybe he did? If a mafia boss repeated the exact same words, there would be no doubt. And we’re quoting him verbatim. This is exactly what the Securities Exchange Commission’s Chairman told The Washington Post. They had Gary Gensler as a guest in their “The Path Forward” series. The host was David Ignatius. They talked about “those five- or six thousand projects” that are “raising money from the public.”

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Yesterday, we focused on Gary Gensler’s comments about stablecoins and Evergrande. Today, the topic is fighting words… or are they? Read what he had to say and decide for yourself.

Gary Gensler Lures Crypto With Honey And Vinegar

The topic of the day, of course, is, are cryptocurrencies securities? And the head of the Securities Exchange Commission appeals to the exchanges and related platforms instead of aiming at the projects themselves. Interesting strategy. Gary Gensler explains:

“If these tokens–and there’s five- or six thousand different projects–if these tokens have the attributes of an investment contract or a note, or have attributes of equities or bonds. And in essence, one of the core issues is that there are platforms: trading platforms where you can buy and sell these tokens; lending platforms, where you can earn a return on these tokens that have not just dozens of tokens but sometimes hundreds or thousands of tokens. And it’s highly likely that they have on these platforms, securities, investment contracts, or notes or others, that fit the definition of security. Those platforms should come in, they should figure out how to register, be an investment–investor protection remit.”

Well, good luck with that. What will happen if people don’t obey your organization’s mandate, Mr. Gensler?

“I do really fear that we’ll keep bringing these enforcement cases, but there’s going to be a problem. There’s going to be a problem on lending platforms or trading platforms. And frankly, when that happens, I think a lot of people are going to get hurt.”

We’re not saying that Gary Gensler is threatening you. He’s obviously speaking about the risks of unregulated markets. However, “there’s going to be a problem” and “a lot of people are going to get hurt.” That’s what the man said.

Gary Gensler (SEC):– is going after the "5000 or 6000 PROJECTS that are raising money from the public [..] anticipating profit"– views #Bitcoin as a "digital, scarce STORE OF VALUE"https://t.co/aw9aQwQ0M6

— PlanB (@100trillionUSD) September 21, 2021

The Definition Of Investment Contract

Here, Gensler is speaking directly to host David Ignatius:

“If you, David, ask some of the listeners from this program to give them your money, something of value. And they were relying on you, David, with maybe five or ten other entrepreneurs and computer scientists to build a platform–build a platform, that token and so forth, and they were giving it to you with an anticipation of profits. Our Supreme Court long ago said that’s an investment contract.”

And it’s hard to argue with that. However, it sounds threatening when you mix it with this:

“So, public money has a certain place around the globe. Private monies usually don’t last that long. So, I don’t think there’s a long-term viability for five- or six thousand private forms of money. History tells us otherwise. So, in the meantime, I think it’s worthwhile to have an investor protection regime placed around this.”

The newspapers went with that phrase, “I don’t think there’s a long-term viability for five- or six thousand private forms of money,” for their headlines. The markets tumbled. Some people argued that, in context, the phrase wasn’t that menacing. Maybe, but, if you mix it with something like this:

“And I think at $2 trillion, 5- or 6,000 projects, that it would be better to be inside investor-consumer protection, inside the tax compliance and anti-money laundering and financial stability.”

A crystal clear picture of the SEC’s intentions and politics emerges.

🤯 pic.twitter.com/XUlSV31jEw

— Eduardo Prospero (@edprospero23) September 23, 2021

What Does Gary Gensler Think About Bitcoin?

According to the Securities Exchange Commission, Bitcoin is a commodity. Its unique characteristics make it so. Also, there’s Gary Gensler’s reverence for Satoshi Nakamoto and the fact that he taught a cryptocurrencies class at MIT. Because of all that, Bitcoiners seem to feel like they’re exempt from the SEC’s wrath. Are they, though?

When host David Ignatius asked about Bitcoin’s effectiveness as a store of value, Gary Gensler answered:

“I mean, holding a highly volatile asset–bitcoin is that. It’s a digital, scarce, I would even say speculative store of value. To hold appropriate capital, if it’s on a bank’s balance sheet, which seemed to fit into the remit that we’ve had in the past, that there be appropriate shock absorbers against the potential loss.”

That doesn’t sound like a Satoshi Nakamoto fan. Or like he appreciates Bitcoin at all. Flat out, what do you think about Bitcoin as an innovation Mr. Gensler?

“I think it’s been a catalyst for change. Nakamoto-san’s innovation, not only bitcoin as the first sort of one but this whole distributed ledger technology has been a catalyst for change that, around the globe, central banks and the private sector are looking in on how we can enhance our payment systems, and enhancing our payment systems to make them 24 hours a day, 7 days a week, real time, at lower cost.”

He did everything but say “Blockchain, not Bitcoin.” That slogan might’ve been phased out, but apparently, the idea remains. That’s actually what presumed pro-crypto regulator Gary Gensler thinks that Bitcoin brought to the world. A catalyst for the central banks and the private sector to step up their game. Wow.

Related Reading | This Is What Gensler’s Confirmation Could Mean For XRP

BTC price chart for 09/23/2021 on Bitstamp | Source: BTC/USD on TradingView.com
And What’s His Position On Decentralized Lending?

You’re not going to believe what this man thinks about DeFi lending. According to Gary Gensler:

“It’s raising new and interesting innovations around how exchanges work and how even potentially some forms of decentralized lending. We’ve had peer-to-peer lending for 15-20 years, we’ve experimented with it. This is a new type of experiment. So, those, I think, are really interesting innovations challenging the established business models.”

Oh. That’s actually a fair description of the phenomenon. Never mind, then. Carry on.

Featured Image: Screenshoot from video interview | Charts by TradingView

The Chairman of the Securities Exchange Commission, Gary Gensler, showed his cards. He spoke with legacy-media-operation The Washington Post and host David Ignatius for their series “The Path Forward” and spilled the beans. We at NewsBTC saw the whole interview so you don’t have to. We selected the most crucial quotes, and present them in all their splendor for you all to read them and reach your own conclusions.

Of course, we’re going to offer our two cents. We’re not made of steel. In general, though, you’ll get Gary Gensler’s unadulterated words. They’re shocking enough as it is.

Gary Gensler Is Looking Directly At Stablecoins

Even though host David Ignatius had no questions about stablecoins, the topic was on Gensler’s mind. The SEC’s Chair brought it up a couple of times. First, he said:

“On something called stablecoins, and how the banking agencies–and we, too, market agencies–coordinate because these stablecoins may have attributes of investment contracts, have some attributes like banking products, but the banking authorities right now don’t have the full gamut of what they need.”

But his organization is not only thinking about stablecoins and trying to define them and isolate their attributes. They’re preparing a formal document:

“We’re working right now under the guidance of Secretary Yellen and working on a report around stablecoins, and in the world of stablecoins, I do think that there would be some help from Congress.”

This doesn’t seem that bad. Their report could conclude that stablecoins are a useful innovation and tool that the whole financial system can benefit from, right? Wrong. This is what Gensler and the SEC think about stablecoins, and pay attention to the language:

“These stablecoins are acting almost like poker chips at the casino right now; so, add to the Wild West analogy. I mean, we’ve got a lot of casinos here in the Wild West and the poker chip is these stablecoins, you know, at the casino gaming tables.”

Things are about to get interesting for stablecoins, it seems.

USDT Market Cap by Cryptocap | Source: USDT on TradingView.com
Does The SEC Want Crypto Exchanges To Register?

Look, there are no two ways about this. Gary Gensler wants all exchanges, including decentralized ones, to register with the Securities Exchange Commission. To convince them, he asks for the exchanges to come to him:

“I think it would be better–the platforms that are trading securities, the platforms that have lending products, who have what’s called “staking products,” and I’m glad to describe that for your listeners, but where you actually put a coin at the platform and you earn a return–that they come in and we sort through, figure out how best to get them within the perimeter.”

And, you might ask, what perimeter is that? Well, this quote makes it very clear:

“I think at $2 trillion, 5- or 6,000 projects, that it would be better to be inside investor-consumer protection, inside the tax compliance and anti-money laundering and financial stability.”

This goes in line with recent declarations from Gensler about the need for crypto regulation:

“Gensler believes that if the market is to grow, then it needs to embrace regulation. The SEC chairman explained that regulation would provide trust in the market, which is important if the market does not want to become irrelevant over time. “Finance is about trust, ultimately,” Gensler said. Gensler’s focus is mostly on trading platforms, given that this is where the majority (~95%) of activities in the crypto market are carried out.”

Is Gary Gensler Even a Cryptocurrency Enthusiast?

Since the new Head of the SEC once taught a class on Cryptocurrencies at MIT, people assumed he would be a pro-crypto legislator. Is he, though? Let’s read what he said about the subject specifically:

“I do think this new technology is a very interesting–and whomever she was, Satoshi Nakamoto, it’s led to change. It’s pushing at the side of central banks around the globe to reconsider how to provide payment systems. It’s pushing on the side as a catalyst for change in finance, so-called “fintech,” the intersection of new technologies and finance.”

So, a non-comital opinion. However, Gensler feels strongly about bringing cryptocurrencies into a public policy framework. So strongly, that he said, “I don’t think technologies long last outside of a social and public policy framework.” And then, “I think it’s better to bring it inside the public policy framework and ensure that we address these important public policy goals.” And later on one more time, “So, new technology is generally a good thing; it challenges the establishment. But I don’t think that new technologies really long exist outside of public policy frameworks.”

Does Any Of This Have To Do With Evergrande?

Days after our report about the situation, Evergrande became one of the biggest stories of the year. We explained that the company reportedly owes $300B, and the most likely cause for all that:

“Apparently, China Evergrande was caught in a loop. The company was pre-selling apartments and using that money to fund other projects, in which they also pre-sold the apartments and the cycle started again. Evergrande bonds are suspended, and there’s a chance they won’t be active ever again. They might be worthless. The stock is near its all-time low, it has lost nearly 80% of its value this year.”

Of course, The Washington Post’s Mr. Ignatius had to bring the subject up. He said that analysts are worried that there could be “contagion in financial markets, like what we remember from 2008 and the failure of Lehman Brothers.” Then, he asked: “Are you confident that our financial markets today are protected in the event that there was such a failure, not necessarily over this company but any large company with that level of debt?”

Gensler refused to comment on a Chinese company, that’s out of his jurisdiction. To the question, he answered:

“I do think the reforms after the 2008 crisis stood up a much stronger U.S. financial system. It doesn’t mean that there aren’t issues that we look at, at the SEC and other important regulators like the Federal Reserve and the bank regulators and CFTC, that I once was honored to chair. But I do think that we’re in better position in 2021 to absorb some of those shocks than we were prior to the ’08 crisis, but it doesn’t mean we’re isolated. Our economies are connected around the globe.”

Featured Image: Screenshoot from the interview | Charts by TradingView