Gary Gensler: An Enemy to Crypto, But Well-Intentioned

Confirmation that Gary Gensler would step down as SEC chair when Donald Trump takes office was met with unfiltered contempt from the crypto community.

The one-time lecturer on blockchains and digital currencies has widely been regarded as an aggressive enemy to the industry.

Kristin Smith of the Blockchain Association's claimed that the SEC's clampdown on the sector was hugely disproportionate, considering crypto represented a mere 0.25% of global markets.

The next SEC chair is the most critical position for crypto @realdonaldtrump will appoint.

The chair must be a known quantity committed to undoing the damage of the last 4 years, have expertise on crypto–and share Trump’s vision of making the US the crypto capital of the world.
— Kristin Smith (@KMSmithDC) November 19, 2024

But when you peel away the combative rhetoric, which clearly comes from a group of people with a vested interest in regulation, it can be argued that Gensler was well-intentioned from the get-go.

A seasoned investment banker with a thorough knowledge of Wall Street and Washington, he amassed a deep understanding of blockchain technology long before it was fashionable.

Just a few highlights from Gensler's professional bio:

18 years at Goldman Sachs
Assistant Secretary of the U.S. Treasury during the Clinton's Presidency
Member of the Sarbanes-Oxley Act team
Chairman of U.S. CFTC during Obama's Presidency
Gensler taught a course on blockchain at MIT
Since 2021 the Chairman of the U.S. SEC

And throughout his stint at the top of the SEC, his motivation was clear: shielding impressionable consumers from devastating financial harm.

Gensler declared war on "fraudsters" and "hucksters" — and took celebrities to task when they promoted little-known coins to their millions of followers, without disclosing they had been paid to do so.

Today we announced charges against Kim Kardashian for promoting a crypto security offered by EthereumMax without disclosing the payment she received for the promotion.

Kardashian agreed to settle the charges, pay $1.26 million, and cooperate with the investigation.
— U.S. Securities and Exchange Commission (@SECGov) October 3, 2022

While the fines handed to the likes of Kim Kardashian amounted to nothing more than a slap on the wrist, multi-year bans on posting about digital assets had a bigger impact — deterring other A-listers tempted by the prospect of a quick payday from doing the same.

And given how countless cryptocurrencies have delivered astronomical gains, prompting inexperienced investors to pile into the space, Gensler's determination to educate the public is well-founded.

Despite all of this, the history books will show the outgoing SEC chair did make a few missteps.

He faced uncomfortable scrutiny over his dealings with Sam Bankman-Fried, especially considering he held private talks with the entrepreneur in the months before FTX collapsed.

While that platform went bankrupt after misappropriating billions of dollars in customer funds, the SEC was focusing its efforts on going after exchanges like Coinbase — a publicly listed company that had tried to find a path forward with the regulator but was rebuffed.

Exchange-traded funds based on Bitcoin's spot price may also have launched years earlier had it not been for Gensler's repeated delays and interventions.

The astronomical performance of these ETFs since their debut on Wall Street perhaps shows how the SEC underestimated the demand for indirect exposure to the cryptocurrency's fluctuations.

Gensler's focus on investor protection came at the expense of innovation — but when a new chair is appointed, the opposite could be true.

If the crypto sector is allowed to run amok with little oversight, it's the little guy who could end up bearing the consequences.