Countdown to leaving office! SEC Chairman Gary Gensler gave a public interview and responded to 11 key questions about cryptocurrency and capital markets

Author: Weilin, PANews

There are only six days left until US President-elect Donald Trump takes office. On January 14, Securities and Exchange Commission (SEC) Chairman Gary Gensler was interviewed by two media outlets, CNBC and Yahoo Finance. His leadership style and policy legacy became a hot topic. Previously, Gensler announced that he would resign as SEC chairman on January 20.

Based on these two interviews, PANews compiled 11 important questions about cryptocurrencies and capital markets and how Gensler responded to them.

1. On January 14, the U.S. Securities and Exchange Commission (SEC) took action against Robinhood and some private equity firms. With less than a week left in your term, can we expect more SEC action?

We are entrusted by the public to ensure capital markets work for them, protect investors and ensure people comply with the law. We have an important responsibility and we will meet it, regardless of who is in leadership. There will be a different leadership transition this week and next, but we will continue to ensure that capital markets work for investors and market participants comply with the law.

This is our job. Essentially, how can you build trust in capital markets if you don’t follow the facts and the law? In fact, honest actors in the market will benefit because more investors are willing to enter the market and participate.

2. What do you think the next administration will mean for the SEC? Are you worried that things you do during your term will be reversed by the next administration?

What we have accomplished during this administration is remarkable. I came on board after GameStop, at the height of a flurry of special purpose acquisition companies (SPACs), and we implemented some of the most significant reforms in the stock market. I will say that we, along with the other commissioners, accomplished this reform in a unanimous and bipartisan manner. We also made significant reforms in the Treasury market. I can't imagine anyone wanting to go back to a longer billing cycle, which we shortened to one day.

I also can't imagine anyone wanting to withdraw the first federal privacy notice to the public stating that you would be notified if your information was compromised by an investment adviser or broker-dealer. I daresay I don't think anyone would want to withdraw these measures. They do not make it easier for company insiders to trade on material non-public information. So, I'm very happy with the work we did.

Of course, democracy has its consequences, and the next team may choose a different direction, but I think these are good policies to reduce costs and promote the integrity of capital markets.

3. Some people believe that supporters of cryptocurrency helped Trump win the latest election. How do you respond to these opinions?

Building trust in capital markets is important, and people need to abide by the laws passed by Congress and this great institution enforces those laws. Think about it, we have rules on the highway, we have traffic lights, and we have patrol officers. If you drive a hybrid car, does it not need to obey traffic laws on the highway? Or that an electric car doesn’t need to comply with regulations on the highway? We also enforce the law consistently in the financial markets, and the cryptocurrency space is not compliant.

I would also say that voters are smart enough to know that they are voting based on other issues, like inflation or other economic issues. I don’t see any indication that cryptocurrencies are a big factor in voter turnout.

4. You have achieved a lot during your tenure. You have talked about shortening the settlement cycle, reforming the money market funds and the Treasury market, etc. But you lost 4 out of 5 challenges to your rules, which is more than the previous 3 presidents combined. Is there anything you wish you could have done differently?

This is an interesting time for anyone who works in government because a lot is changing in the courts. The great hockey player Wayne Gretsky once said something, but the general idea is that you should hit the ball in the direction the puck is flying, not where the puck is. The court here is like a hockey puck, where is the direction of the court? They are reinterpreting the law, whether it is environmental law, communications law, health law or securities law.

We have always acted within the law and worked in accordance with the laws passed by Congress. We have enacted 46 rules that are very important to the capital market, and the vast majority of them have not only been passed, but are already being implemented. So people can now benefit from the rules by, for example, knowing whether company executives were paid on the basis of erroneous financial reporting and whether that information needs to be recovered. As you said, we have reforms in the money markets area, but at the same time, the SEC also now has access to better information on private funds. So we achieved a lot together.

5. You have repeatedly warned about the risks of cryptocurrency. Over the past year, courts have partly forced you to approve spot Bitcoin and Ethereum ETFs, opening up cryptocurrency investment to the masses. Did you wish for a different outcome? Do investors face greater risks as a result?

Bitcoin itself is not a security. Neither my predecessor nor I said that Bitcoin is a security, nor did we say that Ethereum is a security. I think investors in Bitcoin and Ethereum, including what you call the general public, have had the opportunity to invest long before ETF products. The Bitcoin ETF was approved during my term. It was a spot ETF and was launched later. Investors are better protected in spot trading products, with lower fees, stricter regulations, stock market monitoring, and these products are registered and consistent with SEC requirements. My predecessor had rejected these products, and we followed JJ Clayton's lead. Bitcoin and Ethereum account for 70% or even 80% of the crypto market. What I'm really focused on is the other part, those thousands and thousands of tokens, and the condition for them to continue to exist is that investors are essentially investing in, or betting on, a project, and they need to be properly disclosed. The law says you should get such disclosures, but currently these tokens are not compliant. I don’t judge any project prejudged.

6. You seem intent on separating Bitcoin from the rest of the industry. Are you starting to have a new perspective on Bitcoin? Do you think Bitcoin has intrinsic value and is a store of value? Or do you think, when you look back in 10, 15, 20 years, it will be the tulip bubble of the 18th century? You used to teach at MIT, so you should have some opinions. Have you read the book "Bitcoin Standard"?

It's hard to predict. I know the way you view these other coins, I know you have a negative view. But as for Bitcoin, we at the SEC never said it was a security.

Yes, (I have read), I believe Bitcoin is a highly speculative and volatile asset. But there are 7 billion people in the world, and everyone wants to trade it. Just like we have had gold for 10,000 years, we have Bitcoin now, and there may be other similar things in the future. These other thousands of projects need to demonstrate their use cases and prove they have actual fundamentals, otherwise they won't be sustainable.

7. Don’t you like those other coins?

I have never owned any of these coins and I have been doing this for 7 or 8 years.

8. What do you think of the concept of prediction markets, specifically Kalshi’s decision to hire Trump’s son as an advisor?

I have no opinion on who others hire. But the capital market itself is vast, the $120 trillion capital market, whether it's stocks, bonds, or ultimately prediction markets, which are all about predicting future cash flows, or predicting future opportunities for businesses. So these markets are, in a sense, all about prediction markets, and that's why I'm proud of some of the changes we've made. We have implemented better disclosures to ensure that only what is meaningful to investors is disclosed so that they can make their own judgments about the future based on this information.

9. Critics believe that the SEC relies too much on litigation rather than legislation. What do you think?

We have laws. Congress has passed these laws, but of course they can be changed. But part of the crypto space is where the investing public invests in projects, many of which are regulated by securities laws. This is an area where many companies are not complying. Most of what you discuss every day is about a combination of stock, bond, or market fundamentals, valuation, fundamentals, and sentiment. And the crypto space seems to rely more on sentiment and much less on fundamentals. But if there are fundamentals, and I mean if, then there needs to be proper disclosure under securities laws. These are the basic trading rules.

10. What do you think is the biggest risk in the current market?

We are now in the midst of a presidential transition, and democracy has taken hold. Some policies will become clear over time, but policy uncertainty certainly exists. In the past four years, I have also mentioned that there are also areas of capital markets where there is a lot of leverage, a lot of borrowing and low margins. Typically these problems arise in the so-called repo market where commercial banks provide leverage to macro hedge funds. Finally, I think artificial intelligence has transformed productivity and impacted various fields in a positive way, but there are still some risks in the future.

11. If you could do it over again, what decision would you make differently?

I hope that we can complete these reforms of the national debt market and the stock market as soon as possible, and that the issues related to the courts can be handled more smoothly. It is worth noting that the attitude of the courts is changing dramatically. I really hope that we can better predict these changes so that we can do things that will be better able to respond to court challenges.