Gary Gensler, the head of the Securities and Exchange Commission (SEC), is a scarecrow in the crypto community. On a crusade against companies and entities in the sector in recent months, he has been heavily criticised. But a video recently shared on Twitter shows that Gary Gensler wasn’t always so hostile to the sector…
A video that speaks volumes about Gary Gensler’s past positioning
Before becoming head of the SEC, Gary Gensler was a professor at the Massachusetts Institute of Technology (MIT). And he gave courses in particular on the subject of blockchain and cryptocurrencies. An excerpt from his lectures in 2018 has found its way onto Twitter, and it shows an SEC boss who is much more open to cryptocurrencies than he is at present.
Gary Gensler felt at the time that the sector was not really a regulatory issue. He said:
“Three quarters of the market is not securities, it’s just commodities, cash, crypto. […] It’s not particularly an issue from a legal perspective.”
The statement is surprising, as Gary Gensler has made this very notion his recent hobbyhorse. He has said that the majority of crypto-currencies are “securities”, including Ether (ETH), which is based on staking mechanisms.
Crypto community reacts to video
The video has of course caused a reaction from a crypto community particularly scalded when it comes to the SEC. As a professor at MIT, Gary Gensler apparently had a much more measured stance on cryptocurrencies. Coinbase CEO Brian Armstrong, who is currently in a battle with the SEC, limited himself to a brief reaction to the video:
– Brian Armstrong ️ (@brian_armstrong) April 26, 2023
Some commentators have pointed out, however, that the crypto market has changed a lot since 2018, and that the explosion of prices, and of certain sectors such as decentralised finance (DeFi), must have been involved in changing the SEC director’s opinion. But is this legitimate? After all, assessing the status of an asset as a security is based on a test, the Howey test. And that test does not change, regardless of the amounts involved.
In 2018, Gary Gensler stated that “in the three jurisdictions [including the US] that follow the Howey test, […] three-quarters of the markets are not securities”. The nature of these assets has not changed, only their size… And the position held by Gary Gensler, now the head of the SEC. So one wonders why he has made such a sharp turn towards strong regulation of the sector.
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