Cryptocurrencies Face Greater Oversight Under Gensler-Led SEC

[squatter]

President-elect Biden is expected to nominate Gary Gensler -- ex-banker and former CFTC chair -- to oversee the SEC later this month. What does that mean for us?

Apparently, it's being speculated that there will be a regulatory crackdown on exchanges. Gensler is known for pushing for investor protections and he has expressed the opinion in the past that exchanges like Coinbase should be regulated by the CFTC or SEC, rather than by the patchwork of state regulators currently overseeing them.

Is the crypto wild west finally coming to an end?

Some excerpts from Bloomberg:

Gary Gensler’s expected nomination to lead the U.S. Securities and Exchange Commission is seen ushering in an era of greater federal oversight of the $1 trillion cryptocurrency market.

Gensler, who most recently taught about cryptocurrencies and their underlying technologies at the Massachusetts Institute of Technology, previously chaired the Commodity Futures Trading Commission and was a partner at Goldman Sachs Group Inc. He is known for pushing back at banks and corporations in search of greater investor protections.

In talks and editorials over the last several years, he’s advocated for a nationwide way to register and monitor cryptocurrency exchanges, instead of leaving oversight to the states. That could have implications for online exchanges like Coinbase Global Inc., which is planning to go public.

The SEC going after Ripple may just be the beginning. It could be a year filled with lawsuits against token issuers:

He has also long railed against illegal offerings of securities, which the SEC has been actively pursuing. In December, the agency filed a lawsuit against Ripple Labs Inc. for issuing more than $1 billion in unregistered tokens XRP. In a 2019 keynote at Harvard Law School, Gensler said “I don’t think the SEC is going to leave many ICOs off the hook.”

In his 2019 Congressional testimony, Gensler appeared to favor projects like Facebook-led Diem, which used to be called Libra -- an effort to create a cryptocurrency for payments. But he did suggest that the effort may need to have banking regulations applied to it.

“Gary is extremely dialed-in on the crypto markets and understands them extremely well,” said Nic Carter, co-founder of researcher Coin Metrics. “If his stated views are any indication of his priorities as commissioner, I would expect the SEC to continue with or even accelerate its agenda of discouraging unregulated securities issuance in the form of tokens.”

[Theb]

As long as it is all about regulations and not some kind of blanket ban for crypto I can still see the US thriving for cryptocurrencies. Also Hester Pierce the know mother of crypto is still in term until 2025 so I think there will still be some kind of debate and not a one-sided kind of policy making. Changes or upgraded kinds of regulations is something we really need to adjust and I think there will be no surprises in that area because we all know these things have a high chance of happening everytime Bitcoin and other cryptos are pumping in price. Other than that I think the SEC already knows the potential effect the economy of the US will have if they have some kind of ban against crypto so I don't think they will go at that point.

[squatter]

As long as it is all about regulations and not some kind of blanket ban for crypto I can still see the US thriving for cryptocurrencies.

It depends how stiff the regulations are. If they're too expensive and difficult to comply with or too overreaching, innovators and businesses will just leave the country, as Matt Corallo rightly points out here:

Square Crypto developer Matt Corallo said this approach will harm the industry if the Biden administration makes good on the Trump administration’s isolationist penalties and proposals.

“It is absolutely clear [Treasury Secretary Steven] Mnuchin wants this done before Biden takes over, though what’s less clear is whether Biden’s treasury under [incoming Treasury Secretary Janet] Yellen will be more cryptocurrency-friendly,” Corallo said. “The BitGo penalty is likely to make building user-friendly cryptocurrency wallets impossible in the United States. Instead, innovation will happen elsewhere and American competitiveness in the emerging industry will take a huge hit.”

Also Hester Pierce the know mother of crypto is still in term until 2025 so I think there will still be some kind of debate and not a one-sided kind of policy making.

Hester Pierce is definitely not running the show.

I'm also concerned about a much larger crackdown than just from the SEC -- the CFTC, the Treasury Department, FinCEN, the Consumer Financial Protection Bureau, etc. I'm getting the feeling that lots of agencies are gearing up for a busy year.

[Theb]

~snip

It depends how stiff the regulations are. If they're too expensive and difficult to comply with or too overreaching, innovators and businesses will just leave the country, as Matt Corallo rightly points out here:

Square Crypto developer Matt Corallo said this approach will harm the industry if the Biden administration makes good on the Trump administration’s isolationist penalties and proposals.

“It is absolutely clear [Treasury Secretary Steven] Mnuchin wants this done before Biden takes over, though what’s less clear is whether Biden’s treasury under [incoming Treasury Secretary Janet] Yellen will be more cryptocurrency-friendly,” Corallo said. “The BitGo penalty is likely to make building user-friendly cryptocurrency wallets impossible in the United States. Instead, innovation will happen elsewhere and American competitiveness in the emerging industry will take a huge hit.”

So this is just an indication that the upcoming government is really not here to make some changes that would harm the crypto industry. I know new rules might be imposed but this is just something that we need to accept because like I said the crypto industry have turn heads again and with this much attention you would expect that the government will be involve in several kinds of ways. For me I think the biggest concern for crypto-users will be mostly in adjustment just like what they are experiencing everytime they file their income report with the IRS related to cryptocurrencies.

~snip

Hester Pierce is definitely not running the show.

I'm also concerned about a much larger crackdown than just from the SEC -- the CFTC, the Treasury Department, FinCEN, the Consumer Financial Protection Bureau, etc. I'm getting the feeling that lots of agencies are gearing up for a busy year.

From what I have seen crackdowns that is implemented by the government is either through KYC and AML procedures most of their tracking is with the assistance of chainalysis which have shown that even government agencies like FBI and DEA have been funding them and aside from that they always have the power to trace someone through crypto-related businesses like what they did with Coinbase during the Twitter hacking. We can see a bunch of this if crypto will be used more.

[odolvlobo]

Bitcoin is not a security, so the SEC is irrelevant. On the other hand, FinCEN, CFTC, and IRS are who you need to watch out for.

[figmentofmyass]

Bitcoin is not a security, so the SEC is irrelevant. On the other hand, FinCEN, CFTC, and IRS are who you need to watch out for.

congress could always amend the securities exchange act to include bitcoin and exchanges. i dunno how likely that is, but i mention it because gary gensler has in the past advocated for bringing crypto exchanges under SEC jurisdiction.

[dansus021]

The SEC going after Ripple may just be the beginning. It could be a year filled with lawsuits against token issuers:

He has also long railed against illegal offerings of securities, which the SEC has been actively pursuing. In December, the agency filed a lawsuit against Ripple Labs Inc. for issuing more than $1 billion in unregistered tokens XRP. In a 2019 keynote at Harvard Law School, Gensler said “I don’t think the SEC is going to leave many ICOs off the hook.”

In his 2019 Congressional testimony, Gensler appeared to favor projects like Facebook-led Diem, which used to be called Libra -- an effort to create a cryptocurrency for payments. But he did suggest that the effort may need to have banking regulations applied to it.

“Gary is extremely dialed-in on the crypto markets and understands them extremely well,” said Nic Carter, co-founder of researcher Coin Metrics. “If his stated views are any indication of his priorities as commissioner, I would expect the SEC to continue with or even accelerate its agenda of discouraging unregulated securities issuance in the form of tokens.”

Holy shit it is going worse 

[magneto]

And yet I see some people trying to spin this as a positive for BTC.

If regulations do tighten under the new SEC leadership, then grassroots adoption will be significantly hindered. I can't see any positives about it.

Sure, institutional demand will likely keep up and be unaffected, because they did not trade P2P or anonymously on certain exchanges anyway.

But it is the retail demand that constitutes actual adoption in the long run. And with draconian restrictions that require people to provide everything and anything from their drivers' licence to prove/source of income, regular Joes will more likely than not be turned off by the hassle and/or the lack of privacy that a supposedly pseudoanonymous coin offers (at least at centralised junctures).

[malevolent]

And yet I see some people trying to spin this as a positive for BTC.
If regulations do tighten under the new SEC leadership, then grassroots adoption will be significantly hindered. I can't see any positives about it.
Sure, institutional demand will likely keep up and be unaffected, because they did not trade P2P or anonymously on certain exchanges anyway.
But it is the retail demand that constitutes actual adoption in the long run.

Without grassroot adoption there wouldn't be any of the so-called institutional demand, individual users' demand for Bitcoin/cryptocurrencies lay the foundation for bigger players to come, who actually are still a small minority of users and hodlers, so might as well call increased regulations if they get draconian enough a 'soft-ban' on Bitcoin/cryptocurrencies.

[figmentofmyass]

And yet I see some people trying to spin this as a positive for BTC.

If regulations do tighten under the new SEC leadership, then grassroots adoption will be significantly hindered. I can't see any positives about it.

federal regulation (as opposed to prohibition) gives the green light to mainstream investors. it's a major form of legitimization for bitcoin in the eyes of society. most people i know IRL are either too sketched out by exchanges or too overwhelmed by the technical aspects of bitcoin to buy in. this would take care of the former concern, and sadly, third party custody takes care of the latter.

plus, they're laying the ground for an ETF approval.

Sure, institutional demand will likely keep up and be unaffected, because they did not trade P2P or anonymously on certain exchanges anyway.

But it is the retail demand that constitutes actual adoption in the long run.

retail investors are definitely adopting---just not in the ways that we early adopters would like. they're using paypal, robinhood, square, not holding their own keys, and they generally view bitcoin as an investment and not a decentralized currency.

all is not lost though. when i first entered this space, i viewed bitcoin the same way. i came because of the hype and because i thought it would make me rich. but then i rode out the bear markets and became a legitimate user. many have and will follow the same path.

[dothebeats]

It could be good or it could be bad, as regulations often pave the way for legitimization of services and assets that are deemed to be high-risk by a lot of investors and the general public. It could potentially end up bitcoin's "wild west" nature should bills, regulations, and whatnot already come into play, though with it is the high potential of the general public actively participating in the exchange action since regulations already eliminated the 'doubt' they might have had on exchanges and bitcoin in general before.

The XRP case is just the start. IMO it's actually healthy for the scene to get rid of offerings that are producing money out of thin air and leaving some investors in the dirt after their funding becomes a success. This helps the not-so-knowledgeable into participating in the market without the fear of getting burned by these same offerings that have ravaged many people's wallets in the past few years.

[stompix]

So suddenly Clayton was the good guy 

I don't know what his plans with bitcoin are but what he defined as "single-use" altcoins or tokens are going the way of the dodo bird.
https://www.media.mit.edu/posts/remarks-at-blockchain-event/

Also Hester Pierce the know mother of crypto is still in term until 2025 so I think there will still be some kind of debate and not a one-sided kind of policy making.

Hester Pierce has no word in this, besides she was nominated by Trump and the republicans so probably nobody will give a damn what she says in a couple of months, and besides you can see in what influence she had till now, close to zero in 3 years.
Besides she is more like an altcoin mom, I see her more interested in ICOs than bitcoin.

[figmentofmyass]

I don't know what his plans with bitcoin are but what he defined as "single-use" altcoins or tokens are going the way of the dodo bird.
https://www.media.mit.edu/posts/remarks-at-blockchain-event/

i didn't catch that reference and it didn't come up on google. what do you mean by "single-use" tokens?

Besides she is more like an altcoin mom, I see her more interested in ICOs than bitcoin.

that was only natural, given that bitcoin can't be defined as a security. tokens and non-mineable altcoins though---that space has got the SEC's name written all over it.

i do anticipate an altcoin bull run this year, but i suspect the combination of bitcoin 2nd layer functionality improving/taproot coming online + an SEC crackdown on altcoins/tokens will put a damper on it and move investor attention back to bitcoin.

[Harlot]

Also Hester Pierce the know mother of crypto is still in term until 2025 so I think there will still be some kind of debate and not a one-sided kind of policy making.

Hester Pierce has no word in this, besides she was nominated by Trump and the republicans so probably nobody will give a damn what she says in a couple of months, and besides you can see in what influence she had till now, close to zero in 3 years.
Besides she is more like an altcoin mom, I see her more interested in ICOs than bitcoin.

Uhmm probably has something to do with ICOs being more security related which is under SEC's direct concern. From what I have seen Jay Clayton in an interview said that Bitcoin is identified as not a security so probably when it comes to law making and regulations coming from the SEC we won't see a direct affect to it towards Bitcoin since its not one of their concerns. Maybe if this law submitted by them got lost in translation to the congress and the senate then maybe this is how things will screw up for Bitcoin if they included all cryptocurrencies.

[stompix]

I don't know what his plans with bitcoin are but what he defined as "single-use" altcoins or tokens are going the way of the dodo bird.

i didn't catch that reference and it didn't come up on google. what do you mean by "single-use" tokens?

It's from another of his interviews, he was expressing concerns that some of those tokens are created to do only one thing, like only buying coffee or getting a cab or only using it in a game, single-purpose coin,s and he was saying that those are not really fitting the description of currency and quite pointless from his point of view.
I've watched quite a few of his interviews lately as soon as his name popped up I've only linked one of them as it was more about bitcoin
Here is the dodo bird one:
https://underscore.vc/blog/gary-gensler-on-the-future-of-blockchain/

that was only natural, given that bitcoin can't be defined as a security. tokens and non-mineable altcoins though---that space has got the SEC's name written all over it.

No, I wasn't referring to "interested" as in her job requirements but interested as all the way, close to the level I would suspect she is on the payroll of a few "teams" out there, all she was talking about was how the ICOs are avoiding the US and how you guys are not allowed to lose your money in those schemes with a 99.9% failure rate.

[squatter]

From what I have seen Jay Clayton in an interview said that Bitcoin is identified as not a security so probably when it comes to law making and regulations coming from the SEC we won't see a direct affect to it towards Bitcoin since its not one of their concerns.

The potential intersection I see: Bitcoin exchanges. The vast majority of exchanges support various altcoins and tokens -- that could potentially put them under SEC jurisdiction regardless of Bitcoin's categorization under the law.

My suspicion is that's what Gensler was referring to when he suggested bringing exchanges under national registration and monitoring. He wants them subjected to the Securities Exchange Act and defined as national securities exchanges.

[Argoo]

It could be good or it could be bad, as regulations often pave the way for legitimization of services and assets that are deemed to be high-risk by a lot of investors and the general public. It could potentially end up bitcoin's "wild west" nature should bills, regulations, and whatnot already come into play, though with it is the high potential of the general public actively participating in the exchange action since regulations already eliminated the 'doubt' they might have had on exchanges and bitcoin in general before.

The XRP case is just the start. IMO it's actually healthy for the scene to get rid of offerings that are producing money out of thin air and leaving some investors in the dirt after their funding becomes a success. This helps the not-so-knowledgeable into participating in the market without the fear of getting burned by these same offerings that have ravaged many people's wallets in the past few years.

The SEC currently plays a dual role for cryptocurrency. On the one hand, there is an attack on cryptocurrency by regulators, however, on the other hand, this allows to streamline its circulation and its further legalization by states, which, in turn, allows investors to be more trusting in cryptocurrency.
At the same time, the SEC's jurisdiction extends only to the United States, which is a relatively small share of the cryptocurrency market.

[magneto]

Perhaps. But this should not deter retail investment.

Sure, institutional investors may be driven away from the increased compliance costs and greater oversight, but retail investors have shown time and time again their willingness to evade any non-enforceable, draconian regulations.

Just think about how many times the Reserve Bank of India has tried to ban BTC, BTC trading, P2P transactions and OTC marketplaces with no avail. There is simply no way to totally restrict access to a decentralised asset like BTC, especially when grassroots support is so high.