How Gary Gensler Became an SEC Star in One Year
It was an eventful time in the cryptocurrency world before regulation was placed in the hands of Gary Gensler. But how did it happen that this man suddenly became a star actor from a supporting role? Let’s light up the backgrounds in three steps.
Step 1: Biden administration decree
The story of Gary Gensler began way back on March 9, 2022. The Biden administration issued an executive order regulating digital assets and required over 16 state institutions to conduct full investigations within six to nine months. At the time, the Biden administration had a solid majority in both the Senate and House of Representatives.
And so began the plan to have the regulations enshrined in law by Congress, because after all they are accountable to the public. Stablecoins were the focus of the Biden decree. Why? Because they are issued by centralized organizations. Regulating them seemed an easy task.
Step 2: Terra (LUNA/UST) crash
But then the unexpected happened: The collapse of Terra (LUNA/UST) . Suddenly it became more difficult for the government. Why? Because hardly anyone in Congress knew anything about algorithmic stablecoins. Regulating something you have no idea about is a big challenge.
Although many claimed that the regulations would come in two to three months, it was already clear at the time that it would not be that easy. The LUNA incident made the situation even more difficult. A stablecoin law was about to be passed in September, but again it failed to get through. The second step towards Gary Gensler.
Step 3: FTX Scandal & Biden’s Loss of Congressional Majority
The November elections took an unexpected turn. Biden lost his majority in the House of Representatives and with that all plans were thrown overboard. The law, which failed in September, now seemed almost impossible in a divided parliament. FTX ‘s demise further increased the pressure on the government.
The upcoming elections in 2024 could no longer be ignored. It became clear that a solution had to be found. The election of new MPs and other bureaucratic delays eventually led to the government implementing its Plan B, which eventually brought Gary Gensler on board.
The result: Gary Gensler and lawsuit regulation
Instead of passing a new law, the government chose to apply the existing laws. Gary Gensler changed his rhetoric, emphasizing that altcoins should be regulated under the Securities Act of 1933. The stakes are high with elections coming up in 2024. The regulatory process with the SEC is expected to be completed later this year. The US government will also be careful to curb the flow of money into the crypto market to prevent liquidity shortages.
The easiest way to do this legally is to free bitcoin they can’t touch and regulate what they can touch (altcoins). Filing a spot ETF application could also be part of Gary Gensler’s plan to pave the way for Bitcoin. Since an individual ban is impossible, they target crypto exchanges.
This is intended to reduce the total number of coins on the exchanges. Exchanges – whatever they are – don’t currently have a strong position in court, so Coinbase and Binance, among others, always steer the discussion towards the interests of the public and the law that needs to be passed in Congress.
