Since the appointment of former investment banker Gary Gensler, the U.S. Securities and Exchange Commission (SEC) has taken a decidedly anti-crypto stance. On January 20, Gensler will leave the SEC, leaving the position open for a nominee from Trump's cabinet.
The regulatory status of crypto assets has been a contentious issue in the United States for some time. Regulators, including the SEC, the Commodity Futures Trading Commission (CFTC) and other agencies, have vied for oversight. Many in the industry see former MIT professor Gary Gensler, who was nominated by the Biden administration to chair the SEC in 2021, as a key driver of this regulatory uncertainty. One of Trump's campaign promises was to remove the SEC chief, but Gensler will now voluntarily step down on January 20, the day of the new president's inauguration.
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The end of the Gensler era
In a blog post, the SEC highlighted Gensler's "accomplishments," noting that as chairman, he implemented reforms to improve the efficiency, resiliency, and integrity of the U.S. capital markets. He held wrongdoers accountable and returned billions to defrauded investors. However, the SEC's post made no mention of Gensler's disastrous approach to the crypto industry.
"The U.S. Securities and Exchange Commission is a remarkable agency. The staff and the Commission are deeply committed to their mission, focused on protecting investors, facilitating capital formation, and ensuring that the markets work well for investors and issuers alike. The staff are true public servants. It has been the honor of a lifetime to work with them on behalf of ordinary Americans to ensure that our capital markets remain the best in the world." - Gary Gensler, SEC Chairman
In reality, under Gensler, the SEC significantly stifled the growth of a multi-billion dollar industry. To avoid waiting for a legal precedent, the SEC adopted a strategy that industry representatives call "regulation by enforcement. Rather than establish clear guidelines, the agency took legal action against companies it deemed to fall within its jurisdiction. The victims of these enforcement actions included some of the largest crypto companies in the U.S., although the SEC failed to prevent any of last year's multi-billion dollar bankruptcies. This strategy was even criticized within the agency itself.
A crypto-friendly SEC under Trump?
Trump has yet to nominate a new SEC chairman. One potential candidate, Dan Gallagher, the chief legal officer of trading platform Robinhood, opted to remain in the private sector. Similarly, former CFTC commissioner Chris Giancarlo did not show an interest in the role neither did crypto-friendly SEC commissioner Hester Peirce. The two current frontrunners are rumored to be attorneys Rob Stebbins and Brad Bondi.
Stebbins has received strong support from Trump's former SEC chairman, Jay Clayton, whom the president-elect has nominated to be U.S. attorney for the Southern District of New York. In an RealClearMarkets report published in October, Stebbins criticized Biden's financial regulators, particularly Gensler, for pursuing a policy of regulation by enforcement. Bondi is also considered a crypto-friendly nominee. There are already signs of a shift in the SEC's approach. According to FOX journalist Eleanor Terrett, the agency has been in serious talks with ETF issuers about a Solana-based product, a move that would have been unthinkable under Gensler's leadership.
