While there, Gensler helped devise and institute a new oversight regime for the swaps market that had been largely unregulated prior to the financial crisis. Skip Navigation. Key Points.
October 6, The New Yorker. The S. On September 14th, the new chair of the Securities and Exchange Commission, Gary Gensler, appeared before the Senate Banking Committee to talk about how his agency planned to handle the financial markets during his term.
He praised the American financial system, discussed the future of corporate bonds, and ruminated on how the rules of the stock market might be modified to make it more efficient.
Soon, he turned to cryptocurrency markets, which are notoriously volatile, and adopted a darker tone. It is a story of an overreaching regulator unfairly picking winners and losers in the blockchain business space, a web of insider connections and conflicts of interest, and thousands of retail investors who were egregiously harmed by the federal agency that is supposed to be protecting them.
Alibaba owns Alipay, the Chinese payments service that was designed to directly compete with western fintech innovations using blockchain. An early investor and co-founder was Joe Lubin. In parallel, Lubin founded…. ConsenSys , a for-profit consulting firm to promote and profit from building enterprise blockchain solutions exclusively on the Ethereum network.
Lubin received 9. It should not be lost on you that the SEC was investigating and prosecuting dozens of ICOs that orchestrated crowd-fundraising exactly the way Lubin and Ethereum did i. At the time of this December 13, meeting, Ripple was not under investigation and XRP had been publicly sold and traded for over 4 years. XRP was also battling ether for the number 2 cryptocurrency by market cap behind bitcoin. A key meeting was organized on March 28, , by Andreessen Horowitz, where Ethereum investors presented a proposal for a regulatory free pass for ether.
If you know Mike Novogratz, he cares deeply about his public perception and credibility and he would not go out on a limb and guarantee what the SEC was going to say unless he was assured of it from someone with personal knowledge. Novogratz, like Lubin, predicted that the SEC was going to select one token and its promoters and go after them to shut them down as an example.
The XRP cryptocurrency was never issued in an ICO, operates on a fully decentralized ledger and has been used by project developers and consumers with no connection to Ripple for years. Ripple once objected to a change on the ledger but was overruled by the majority of validators. The point is that the XRP network is arguably more decentralized that the ether network. The timing was very curious. Grundfest argued that no exigency existed to file considering that XRP had been traded for over 7 years.
He also warned Clayton that the mere filing of the lawsuit would cause unprecedented billions of losses to individual investors with no connection to Ripple. It should be noted that Grundfest was retained by Ripple. The SEC has also admitted in court that no investigation was ever opened against ether. Here are some key observations:. I am not here to defend the company Ripple in any manner. The truth is that all of these cryptos start out as a security in the first few years.
Arguably, bitcoin is the only crypto asset not to originate a security. Tuttle, who manages Tuttle Capital, had applied for a short bitcoin futures ETF, which would have been allowed to go short bitcoin futures and the Grayscale Bitcoin Trust. Crypto enthusiasts are also worried about the implications of the new infrastructure bill that recently passed Congress. President Joe Biden is expected to sign the measure.
Tucked into the massive bill are two provisions that affect crypto investors. Criminal felony statute that could freeze a lot of healthy crypto behavior like DeFi. A second provision would redefine "broker" to include "any person who for consideration is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.
His MIT perch conferred the appearance of academic expertise on blockchain. It turns out there is little record of him writing or speaking about the technology until the school hired him in Are altcoins part of it? What about Ripple? Gensler was the perfect front man for the Lab. The SEC just emerged from a rash of enforcement actions against crypto frauds and scam coins throughout and was pondering whether to declare the three top cryptocurrencies — bitcoin, ether and XRP — to be unregistered securities and subject to costly enforcement actions.
Neither seemed interested in setting clear, coherent rules that could be applied across the board as much as they wanted to set rules that were best for them. In their June presentation , Gensler and Ito referenced the Howey Test from the Supreme Court decision that established a method for defining securities but never contemplated the complexities of blockchains and ledgers.
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