Securities and Exchange Commission Chair Gary Gensler, who was aggressive in his oversight of cryptocurrencies and other financial markets, will step down from his post on Jan. 20.
Mr. Gensler pushed changes that he said protected investors, but the industry and many Republicans bristled at what they saw as overreach.
President-elect Donald Trump had promised during his campaign that he would remove Mr. Gensler. But Gensler on Thursday (November 21, 2024) announced that he would be stepping down from his post on the day that Trump is inaugurated.
Bitcoin has jumped 40% since Trump’s victory. It hit new highs on Thursday (November 21, 2024) and was nearing $100,000. Bitcoin moved notably higher still after Gensler’s resignation was announced.
Gensler’s stance on the rise of cryptocurrencies was captured during a speech he gave during the first year of his chairmanship in 2021 where he described the market as “the Wild West.”
“This asset class is rife with fraud, scams, and abuse in certain applications,” he said in a speech at the Aspen Security Forum. “There’s a great deal of hype and spin about how crypto assets work. In many cases, investors aren’t able to get rigorous, balanced, and complete information.”
Under Gensler, the SEC brought actions against players in the crypto industry for fraud, wash trading and other violations, including as recently as last month when the commission brought fraud charges against three companies purporting to be market makers, along with nine individuals for trying to manipulate various crypto markets.
Yet access to cryptocurrencies became more widespread under Gensler. In January, the SEC approved exchange-traded funds that track the spot price of bitcoin. With such ETFs, investors could get easier access to bitcoin without the huge overlays required to buy it directly.
Gensler, however, acknowledged the SEC had denied earlier, similar applications for such ETFs, including Grayscale Bitcoin Trust, among the first to eventually be approved by the SEC.
“Circumstances, however, have changed,” Gensler said, pointing to a ruling by the U.S. Court of Appeals for the District of Columbia that said the SEC failed to adequately explain its reasoning in rejecting Grayscale’s proposal.
Even there, Gensler made sure not to endorse the merits of bitcoin. He pointed to how ETFs that hold precious metals are tracking prices of things that have “consumer and industrial users, while in contrast bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing.”
Gensler was tested early in his tenure with the rise of the meme stock phenomenon that shocked the financial system in early 2021. Earlier this year, the SEC under Gensler pushed Wall Street to speed up how long it takes for trades of stocks to settle, one of the areas where the commission’s staff recommended changes following the reckoning created by GameStop, one of the first meme stocks.
In the depths of the COVID-19 pandemic, hordes of smaller-pocketed and novice investors suddenly piled into the stock of the struggling video-game retailer. During the height of the frenzy, several brokerages barred customers from buying GameStop after the clearinghouse that settles their trades demanded more cash to cover the increased risk created by its highly volatile price.
In May 2024, new rules meant broker-dealers have to fully settle their trades within one business day of the trade date, down from the previous two.
Critics of the SEC under Gensler have called many of the agency’s proposals overly burdensome.
The investment industry, for example, is pushing against a proposal to force some advisers and companies disclose more about their environmental, social and governance practices, otherwise known as ESG. Critics say the proposal is overly complex and increases the risk of investor confusion, while imposing unnecessary burdens and costs on funds.
On Thursday (November 21, 2024), Gensler stood by the SEC’s track record under his direction.
“The staff and the Commission are deeply mission-driven, focused on protecting investors, facilitating capital formation, and ensuring that the markets work for investors and issuers alike,” Gensler said in prepared remarks. “The staff comprises true public servants.”
Mr. Gensler previously served as Chair of the U.S. Commodity Futures Trading Commission, leading the Obama Administration’s reform of the $400 trillion swaps market. He also was senior advisor to U.S. Senator Paul Sarbanes in writing the Sarbanes-Oxley Act (2002) and was undersecretary of the Treasury for Domestic Finance and assistant secretary of the Treasury from 1997-2001.
Published – November 22, 2024 08:56 am IST
