Forbes: Gary Gensler's Three Stages from Crypto Ally to Industry Enemy

Original: 《From Ally To Adversary: The 3 Stages Of Gary Gensler's Crypto Evolution》

Written by: Sam Lyman

Translated by: Luffy, Foresight News

Washington D.C. - SEC Chairman Gary Gensler has established close ties with members of Congress…

Who watches the watchers?

As the budget and scale of federal bureaucracies continue to expand, this age-old question becomes increasingly important.

However, as the U.S. government evolves, the influence of the fourth estate is also growing. Social media has enabled a new generation of citizen journalists to hold public officials accountable by scrutinizing their past positions. In recent weeks, attention has focused on SEC Chairman Gary Gensler.

As the SEC intensifies its regulatory efforts on cryptocurrency, lawmakers have been pressuring Gensler to change his stance on digital assets. Thanks to the work of professional journalists and amateur sleuths, the contradictions between Gensler's past and present statements have surfaced on Twitter. This decentralized community is diligently monitoring the monitors.

What have they discovered? Gensler's views on cryptocurrency have undergone a significant transformation. Below is a timeline of his long journey from industry ally to adversary.

### Stage One: Ally (2018 to 2020)

While Gensler's recent enforcement actions have made him an enemy of the industry, it wasn't always this way. Many in the cryptocurrency space once viewed him as a forward-thinking regulator and friend. Before taking the helm at the SEC, Gensler spent three years in academia, where he earned a reputation as a public leader who recognized the innovative potential of cryptocurrency.

2018

Gensler delivered a speech to a group of hedge fund managers about the policy implications of emerging cryptocurrencies. In his remarks, he clearly stated that Bitcoin, Ethereum, Litecoin, and Bitcoin Cash "are not securities." Given that these tokens accounted for a significant portion of cryptocurrency trading volume at the time, he remarked that "three-quarters of this market may not be securities."

That same year, Gensler began researching digital assets at MIT and teaching blockchain and cryptocurrency-related courses at the university. There, he gave a talk discussing the question: Are cryptocurrencies securities or commodities? His answer was, "Both. I know that's not the answer many people want to hear, but that's where we are right now."

2019

Gensler spoke at a fintech conference in New York City, where he praised Algorand and its chief developer Silvio Micali (Gensler's colleague at MIT). Gensler called Algorand's project "a great technology," noting that the blockchain is very efficient, "you can create an Uber on it."

According to Binance's lawyer, that same year, Gensler proactively sought to become an advisor to the cryptocurrency exchange and even had a special meeting with Binance CEO Changpeng Zhao in Japan. (To date, Gensler has not refuted this claim).

2020

Gensler taught his final course on blockchain and cryptocurrency at MIT. His lectures were available for online viewing, leading many to believe that if he returned to public service, he would adopt a pro-innovation stance on cryptocurrency. With Biden's election as president, speculation grew that he would appoint Gensler as SEC chairman.

### Stage Two: Skeptic (2021-2022)

Sure enough, President Biden appointed Gensler as SEC chairman. Given some of Gensler's past public statements and praise for various crypto projects, many in the crypto community cheered his appointment. For example, Senator Cynthia Lummis tweeted, "While the SEC has a reputation for being a black hole for innovators, Gary Gensler has recognized the potential of crypto assets."

In fact, with Gensler's appointment, the mood on Capitol Hill was sunny and optimistic. But shortly after taking office, Gensler's attitude toward cryptocurrency began to shift.

2021

In news releases and public comments regarding cryptocurrency, Gensler's tone shifted from open to skeptical—at times even hostile.

The SEC chairman began to express the need for increased regulation, describing cryptocurrency as a "wild west" rife with fraud. He further stated, "I believe many tokens in today's cryptocurrency market may be unregistered securities."

Nevertheless, Gensler acknowledged that cryptocurrency remains in a regulatory gray area. He indicated that congressional legislation would help provide greater clarity for the industry, as "there is no regulatory framework for these crypto asset exchanges within the SEC or our sister agency, the CFTC."

2022

Gensler emphasized the "wild west" narrative even more, adopting a tougher tone. "Of the nearly 10,000 tokens in the cryptocurrency market, I believe the vast majority are securities," Gensler stated in a speech delivered to the entire agency in September. Just two months later, the collapse of cryptocurrency exchange FTX proved some of Gensler's assertions correct.

### Stage Three: Adversary (2023 to Present)

Following the FTX debacle, Gensler's skepticism turned into outright opposition. The SEC grew tired of waiting for Congress to pass legislation and instead adopted an enforcement-based regulatory approach, initiating a series of Wells notices and lawsuits against high-profile cryptocurrency exchanges.

There was only one problem: the new strategy required Gensler to "swallow" all his previous statements about cryptocurrency.

2023

In an interview with New York Magazine, Gensler stated that "everything other than Bitcoin" is a security, a stark departure from his 2018 remarks where he indicated that several major cryptocurrencies were not securities and that many tokens had characteristics of commodities.

Gensler asserted that "the lack of regulatory compliance in the cryptocurrency market, not a lack of transparency," contradicts his own 2021 call for Congress to pass legislation to enhance transparency in the cryptocurrency industry.

While Gensler claimed in 2021 that cryptocurrency lacked a clear regulatory framework at the SEC, he now believes "the law is clear," and all cryptocurrency exchanges must register with the SEC.

Despite reports that Gensler sought to serve as an advisor to cryptocurrency giant Binance in 2019, the SEC is currently suing the company for alleged market manipulation and misuse of customer funds. The SEC has also sued Coinbase, claiming it listed "unregistered securities."

Speaking of unregistered securities, the SEC claims in its lawsuit that ALGO is precisely that. Remember, ALGO is the native token of Algorand, which Gensler praised in 2019 as a groundbreaking technology.

### Gensler's "Anchoring Strategy"

So why has Gensler suddenly reversed his stance?

There is likely a coherent strategy behind his contradictory statements.

As an experienced bureaucrat, Gensler understands better than most how negotiations work in Washington. Effective policymakers employ a negotiation technique known as "anchoring," where the first proposal they put forth often differs significantly from the expected outcome. (Think of Congresswoman Alexandria Ocasio-Cortez's "Green New Deal" or Biden's initial $3.5 trillion price tag for the "Build Back Better" plan).

These initial proposals are often outlandish and have little chance of becoming law. However, they set a reference point for negotiations and make the proposing party appear to be making significant concessions as policy inevitably moves toward the middle.

This may be the logic behind Gensler's actions at the SEC. By taking a hardline stance that "everything other than Bitcoin" is a security, he sets the framework for negotiations, forcing Congress to act on legislation.

### Cryptocurrency More Likely to Be "Digital Commodities"

Congress's response to Gensler has been the McHenry-Thompson bill, which (far from labeling everything other than Bitcoin as securities) proposes a brand new asset class called "digital commodities." Many existing tokens fit the bill's definition of digital commodities, thus placing them under the jurisdiction of the Commodity Futures Trading Commission (rather than the SEC).

The McHenry-Thompson bill is the most comprehensive cryptocurrency framework ever proposed in Congress. It has garnered strong support in the House but may face fierce opposition in the Senate, where Democrats have shown respect for Gensler on many cryptocurrency-related issues. Therefore, if this legislation passes in the current Congress, it is unlikely to do so in its current form.

Another option for the bill's supporters is that Congress may become more crypto-friendly by 2025. But this hinges on the industry being able to withstand another 18 months of SEC crackdowns. In any case, the anchoring strategy is risky, and the risks are even greater when facing a powerful player like Gary Gensler.