Former MIT Sloan School of Management student and teaching assistant for Gary Gensler, known only as ‘Kenny’ on Twitter, has offered insights into the recently filed lawsuits against Binance and Coinbase by the Securities and Exchange Commission (SEC), as well as his personal journey into the world of blockchain and crypto.
Kenny took to Twitter to share his experience of studying under the current SEC Chairman, Gensler, before his appointment to the role. Notably, Kenny wrote a report on Binance Coin (BNB) as a student, which he shared with both Gensler and Binance founder Changpeng Zhao, or CZ as he is commonly known.
Reflecting on this time, Kenny wrote, “It wasn’t the report but the interaction between Mr. Gensler & Mr. Zhao. I felt an opportunity for a future of blockchain that was open to innovation from both the side of the regulator and the innovator.”
Later, while interning in Shanghai in the summer of 2019, Kenny worked with Victor Ji on a project related to decentralized identification for small businesses. Kenny recalls reaching out to Gensler to discuss these ideas, describing their conversation as thoughtful.
In the tweets, Kenny acknowledges his growth in the world of blockchain and credits Gensler, Ji, and Zhao for providing direction and inspiration. Kenny states, “Meeting Mr. Gensler, hacking with Victor, getting recognized by Mr. Zhao… All felt like winds from the universe guiding me.”
This personal connection made the recent lawsuits filed by the SEC against Binance and Coinbase particularly impactful for Kenny. On June 5 and 6, 2023, the SEC filed 13 charges against various Binance entities and sought emergency relief to ensure the protection of Binance.US customers’ assets, respectively.
Speaking about the lawsuits, Kenny said, “The recent news regarding the lawsuits against @binance and @coinbase is truly an unfortunate outcome from the perspective of someone inspired by the same figures entangled in this.”
Despite his personal connections, Kenny remains hopeful for the future of blockchain and crypto, concluding with, “I truly hope that whatever comes out of this takes into account all of the hard work that the brightest minds are putting into the space to change the world.”
Binance, the world’s largest cryptocurrency exchange, is facing allegations of having commingled customer funds with company revenue in 2020 and 2021, violating U.S. financial rules that mandate the segregation of customer money, according to a special report by Reuters. Citing three sources familiar with the matter, the report claims that the exchange held mixed accounts at U.S. lender Silvergate Bank, with sums running into billions of dollars.
According to Reuters’ report, the money flows highlighted a lack of internal controls at Binance, obscuring the location of client assets and risking their security. Despite the serious nature of the allegations, no evidence has been found to indicate that Binance client funds were lost or misused.
The special report by Reuters comes amid increased scrutiny from SEC chair Gary Gensler over the practices of crypto exchanges, with a particular focus on safeguarding client money. While Binance has not been directly targeted by the SEC, it faces allegations from the U.S. Commodity Futures Trading Commission (CFTC) of allowing U.S. customers to trade on its platform despite claims to restrict access.
Binance has refuted the allegations, according to Reuters. Binance spokesperson Brad Jaffe denied the commingling of funds, stating that the accounts in question facilitated user purchases of Binance’s own dollar-linked crypto-token, BUSD, likening the process to buying a product from Amazon.
The report from Reuters has drawn attention to the exchange’s financial operations as it faces civil charges from the CFTC and an ongoing investigation by the Justice Department for alleged money laundering and sanctions violations. The exchange’s banking future is unclear as the crypto sector faces a broader crackdown in the U.S.
The cryptocurrency community has criticized Gary Gensler, the current chair of the Securities and Exchange Commission (SEC) and a former professor at the Massachusetts Institute of Technology (MIT), after a video from 2018 surfaced in which he stated that cryptocurrencies are comparable to commodities or cash and are not securities. This has led to criticism of Gensler from the cryptocurrency community. As a result of this, hypocrisy allegations have been leveled at Gensler since his present position seems to contradict his prior views.
Gensler explained initial coin offerings (ICOs) and the Howey test in the video, which was taken from a seminar entitled “Blockchain and Money” that took place during the Fall Semester of 2018 at the university. He made the observation that “three-quarters of the market are not ICOs or not what would be called securities,” and he identified the markets in the United States, Canada, and Taiwan as countries that adhere to criteria that are comparable to those of the Howey test. The next statement that he made was that “three-quarters of the market is non-securities, it’s just a commodity, cash, and crypto.”
Gensler briefly admitted that initial coin offerings (ICOs) may ignite a discussion over securities, but he ultimately came to the conclusion that “three-quarters of the market is not particularly relevant as a legal matter.” However, in his present capacity as chairman of the Securities and Exchange Commission (SEC), Gensler has adopted a more harsh attitude on cryptocurrencies, with the SEC starting a series of high-profile investigations against crypto businesses in recent months. Gensler’s stance on cryptocurrencies reflects the SEC’s increased scrutiny of the industry.
The crypto community reacted swiftly to Gensler’s apparent shift of viewpoint, and many members were keen to point it out. “Wow” was all that Coinbase CEO Brian Armstrong had to say in response to a message that was published by cryptocurrency researcher “zk-SHARK.” In a tweet sent at his 658,900 followers, Erik Voorhees, the inventor of the cryptocurrency trading website ShapeShift, inquired as to when someone will be imprisoned for fraud. Farokh Sarmad, the inventor of the Web3 podcast Rug Radio, referred to Gensler as “disgusting” in a tweet that he sent out to his 346,200 followers, and a systems engineer who went by the handle “JD” demanded that Gensler provide an explanation for his shift in position.
On the other hand, not all members of the cryptocurrency community were on board with these comments. U.S. attorney Preston Byrne claimed that Gensler’s opinions as a professor should not be used against him in his present function as a law enforcement, since Gensler works in a different capacity than he did when he was a professor.
The continuous regulatory ambiguity that surrounds the cryptocurrency business is brought to light by the controversy over Gensler’s position on cryptocurrencies. As the Securities and Exchange Commission (SEC) and other regulatory authorities continue to probe crypto firms, many participants in the industry are advocating for clearer standards and laws to assist enable the growth and development of the sector.
The Securities and Exchange Commission (SEC) is facing new controversy, as United States Representative Warren Davidson has announced plans to introduce legislation that would remove SEC Chair Gary Gensler from his role. The move follows the SEC’s proposed rule amendments, which could bring certain brokers under additional regulatory scrutiny and redefine an “exchange.” While Gensler has said the proposed changes could benefit investors and markets, SEC Commissioner Hester Peirce has criticized the move, accusing the regulator of stifling new technology and entrepreneurship.
Peirce, who is known as “Crypto Mom” for her pro-crypto positions, has criticized the SEC’s approach to crypto regulations. She believes that the SEC has been expanding its reach to solve problems “that do not exist” and has refused to alter current regulations to allow room for new technologies and new ways of doing business. Peirce has also accused the SEC of using the “notice-and-comment rulemaking process” as a threat. In her opinion, a concept release should have been issued instead of the proposed rule amendments, given the concerns over their ambiguity and scope, and the SEC’s “limited understanding” of the space.
The SEC has faced criticism for using enforcement actions to develop the law on a case-by-case basis, rather than creating clear regulations. The regulator has launched more than a few high-profile actions against crypto companies such as Ripple, LBRY, and Coinbase over alleged violations. It has also taken aim at staking and stablecoins, prompting some critics to argue that the SEC has been stifling innovation in the crypto space.
Meanwhile, Davidson’s proposed legislation to remove Gensler from his role as SEC Chair has raised eyebrows. Gensler is widely regarded as a tough regulator who is committed to protecting investors and ensuring market stability. He has previously served as chairman of the Commodity Futures Trading Commission (CFTC) and is known for his work in implementing the Dodd-Frank Act, which was designed to reform the U.S. financial system after the 2008 financial crisis.
In conclusion, the proposed legislation to remove SEC Chair Gary Gensler from his role is the latest development in a long-running debate over crypto regulations. While Gensler has said that the proposed rule amendments could benefit investors and markets, Commissioner Hester Peirce has accused the SEC of stifling innovation and entrepreneurship. The SEC has faced criticism for using enforcement actions to develop the law on a case-by-case basis, rather than creating clear regulations. It remains to be seen whether Davidson’s proposed legislation will gain traction, but it is clear that the debate over crypto regulations is far from over.
Gary Gensler, the current chairman of the United States Securities and Exchange Commission (SEC), is set to testify before the House Financial Services Committee on April 18. This hearing will mark the first time that Gensler will face questions from the committee and provide an opportunity for the committee to exercise its jurisdiction over all aspects of the U.S. financial services sector, including banking, securities, and digital assets.
During an interview with Representative Patrick McHenry, chairman of the Financial Services Committee, it was confirmed that the hearing would focus on Gensler’s approach toward the crypto ecosystem. McHenry noted that the committee would take a serious approach in laying down a regulatory sphere for digital assets and expressed concerns about Gensler’s rulemaking and approach toward crypto assets.
Gensler’s approach toward crypto has been a topic of concern for many in the industry. Some Democratic party members have voiced their concerns about his approach, which they fear could be disastrous for the party’s 2024 election campaign. Many pro-crypto and pro-Bitcoin Democrats are lining up to voice their opposition to the party’s stance. Dennis Porter, the co-founder of the Satoshi Action Fund, believes that the party’s anti-crypto stance could have negative consequences for its electoral success.
U.S. regulators have taken a hard stance on crypto in the first months of 2023. The SEC has issued Wells notices to several crypto firms, including Coinbase, and the Commodity Futures Trading Commission has filed a new lawsuit against Binance. The crypto community has always highlighted that regulations would be decided by Congress, not individual agencies.
The hearing will provide an opportunity for Gensler to clarify his approach toward crypto and provide insight into the SEC’s regulatory plans. The crypto industry has long awaited clear regulatory guidance, and this hearing could provide much-needed clarity for the industry.
In recent years, the crypto ecosystem has experienced significant growth, and as a result, the need for regulatory oversight has become increasingly pressing. The lack of clear regulatory guidance has hindered the industry’s growth and led to uncertainty for investors and traders alike. The House Financial Services Committee’s oversight hearing with Gensler could provide an opportunity for the committee to establish clear guidelines for the industry and help foster its growth in a regulated environment.
In conclusion, the SEC chief’s upcoming testimony before the House Financial Services Committee on April 18 will be a crucial moment for the crypto ecosystem. The hearing will provide an opportunity for the committee to exercise its jurisdiction over the U.S. financial services sector and lay down a regulatory sphere for digital assets. It will also provide Gensler with an opportunity to clarify his approach toward crypto and provide insight into the SEC’s regulatory plans, which could provide much-needed clarity for the industry.
The collapse of the beleaguered crypto trading platform, FTX Derivatives Exchange has pushed top government officials, including Gary Gensler, the Chairman of the Securities and Exchange Commission (SEC) to weigh in on the digital currency ecosystem.
Speaking in an interview with CNBC, Gensler said he has reiterated time and again that investors need adequate protection. He bemoaned the fact that despite the clear regulations that is existent in the industry, most players are still very much non-compliant to the rules.
“I think that investors need better protection in this space. It’s a field that’s significantly non-compliant, but it’s got regulation,” he said.
For FTX, the SEC boss said the fact that the company has a huge influence in the space in which it has a number of top-profile celebrities including Kevin O’Leary, Tom Brady, and Steph Curry as its ambassadors gives it a massive sway over investors.
In his view, investors and the “public can fall prey to celebrity promotions,” a trait that showed up as very prominent over the past year.
Gensler’s stance that the industry has the laws it needs to guide it is somewhat disputed by top figures in the digital currency ecosystem. In the wake of the FTX implosion, Senator Elizabeth Warren shared a tweet noting she will begin pressing the SEC to intensify its scrutiny of the ecosystem.
In response, Coinbase CEO, Brian Armstrong said America does not have the right guiding laws for players in the industry, a move that has pushed more than 95% of trading activities offshore. Drawing comparisons with Singapore which has defined models for how crypto players should operate, Ripple CEO, Brad Garlinghouse supported Armstrong’s position underscoring the general consensus about the lack of clarity that exists in the industry.
With the fall of FTX, the SEC, Department of Justice and the Commodity Futures Trading Commission (CFTC) are all now reportedly investigating trading platforms in the US, beginning with FTX US. This may likely be the norm moving forward.
US Securities and Exchange Commission (SEC) Chairman Gary Gensler said crypto intermediaries should be registered under the SEC.
Speaking his testimony at a hearing titled “Oversight of the U.S. Securities and Exchange Commission” on Thursday, Gensler referred to securities laws as the “gold standard” for capital markets.
Gensler suggested most crypto tokens are securities, and therefore centralized and decentralized crypto intermediaries should be registered with the SEC in some capacity.
Given that there are a lot of non-compliance in the cryptocurrency space, there are currently too many platforms that are not strictly compliant and not properly registered, he has asked SEC staff to register and regulate tokens of companies linked to cryptocurrency assets as securities, where appropriate, and also to require intermediaries, such as exchanges, broker-dealers, and institutions with custody functions, to register with the SEC in some capacity to trade securities.
In the transcript of his speech, Gary Gensler said stablecoins also need to be registered and regulated because they are considered “stocks that could be money market funds or other securities.”
Gensler pledged that the SEC would “continue to pursue robust enforcement actions” and develop its regulatory framework.
His statement echoed the course of action needed for the cryptocurrency industry to be yet to be regulated. He points out, “Given the Nature of crypto Investments, I recognize that it may be appropriate to be flexible in existing disclosure requirements.”
For cryptocurrency intermediaries, Gensler said it may need to register with both the SEC and the Commodity Futures Trading Commission (CFTC) in one day to become dual registrants.
Gensler said a level playing field is essential if cryptocurrencies are to continue to grow. On additional regulation, the chairman said the SEC will look at all aspects to ensure that regulation does not stifle the market.
In a letter sent to members of Congress, Gary Gensler, Chairman of the United States Securities and Exchange Commission (SEC), promised to give “careful consideration” about spot Bitcoin Exchange Traded Products (ETPs).
Recalled that two Congressmen, Tom Emmer (MN-06) and Darren Soto (FL-09), sent a letter to Gensler back in November last year requesting to know the reason for the commission’s caution towards a spot BTC ETF product when indeed, it has approved a related product based on the futures price of the premier cryptocurrency.
“We question why, if you are comfortable allowing trading in an ETF based on derivatives contracts, you are not equally or more comfortable allowing trading to commence in ETFs based on spot Bitcoin,” the letter read at the time following the approval of ProShares futures-based Bitcoin ETF product. “Bitcoin spot ETFs are based directly on the asset, which inherently provides more protection for investors.”
In response to the inquisition, Gensler said the proposals for both a futures-based and a spot ETF are considered separately based on the provisions of the Exchange Act. While Gensler said, the commission would continue to probe whether the proposals for a spot Bitcoin ETF product are capable of preventing fraud and manipulative practices.
The fears of the SEC are compartmentalised mainly to the U.S., and other countries, including Canada, Brazil, and Germany, have fully functional spot Bitcoin ETF products trading on their public bourses. In a bid to prevent the United States from lagging behind in emerging financial innovations, Rep Emmer tweeted saying;
“This issue remains a priority for us and we will continue to oversee the SEC in its mission to maintain fair and orderly markets and facilitate capital formation.”
While the SEC Chairman reassured that the commission would continue to consider new proposals to list a spot BTC ETF, the ecosystem is hardly optimistic about the chances of anyone emerging soon.
Gary Gensler has declined to comment on whether Ethereum could be classed as a security in a CNBC interview.
The SEC Chairman reiterated the need to bring crypto tokens under the purview of securities regulations.
The SEC has been criticized for its unclear guidelines on cryptocurrencies in recent months.
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SEC Chair Gary Gensler declined to comment on whether Ethereum could be classed as a security in a CNBC interview today.
Gensler Avoids Ethereum Security Question
Gary Gensler has shown his reluctance to clarify Ethereum’s regulatory status again.
In a Monday interview with CNBC Squawk Box, the SEC chairman discussed securities laws surrounding cryptocurrencies with Andrew Sorkin. When Sorkin challenged him about whether he thought Ethereum could be classed as a security, he swerved the question, remarking that he would not speak on a specific crypto asset. “Can you explain your view of whether Ethereum is a security or not—I think you’ve actually suggested it isn’t, but then while you believe that Ripple is a security, and I know there’s an ongoing lawsuit related to Ripple, but could you speak to the Ethereum issue?” Sorkin asked.
“I’m not going to speak to any one matter,” Gensler told CNBC. He added that the SEC doesn’t “get involved in public forums talking about any one project.”
Gensler’s public stance on the number two crypto marks a stark contrast to his predecessor Jay Clayton, who stated that Ethereum was not a security during his tenure at the helm of the SEC.
Securities are instruments that represent ownership in a common enterprise with an expectation of a profit. The issue of whether crypto assets like Ethereum can be classed as a security has been a hot topic in recent years as the space has grown. While the SEC has been criticized for its unclear guidance on cryptocurrencies, Gensler has stated on several occasions that DeFi tokens could be categorized as securities. The SEC has also been in a widely publicized legal battle with Ripple after it accused the firm of selling unregistered securities since late 2020; it’s due to come to a close sometime this year.
Commenting further on the regulatory environment surrounding cryptocurrencies, Gensler remarked that many crypto tokens could be classed as securities and should register with the SEC.He said:
“Unfortunately, way too many of these [projects] are trying to say ‘well, we are not a security, we are just something else.’ I think the facts and circumstances suggest that they are investment contracts, they are securities, and they should register.”
“Crypto tokens–are raising money from the public, and are they sharing with the public the same sets of disclosures that helps the public decide and are they complying with our true in advertising?” says @GaryGensler. “It’s about bringing them into the securities laws.” pic.twitter.com/8mvFimxzXV
— Squawk Box (@SquawkCNBC) January 10, 2022
While Gensler did not elaborate on his current views on Ethereum’s regulatory status, he told an MIT class that he thought it would pass the test as a security when lecturing at the university in 2018. At the time, Gensler explained that he thought Ethereum would pass the Howey Test–an official framework under the U.S. Constitution to determine whether a particular investment is a security offering.
“I think Ether, when it was done in 2014, would pass this [Howey] test. When I say ‘pass,’ it means it’s a security,” he said. He added that the SEC decided that it had become sufficiently decentralized by 2018 and therefore decided to “let it go the other way.” In 2014, Ethereum raised $18 million in Bitcoin in the first Initial Coin Offering to kick off the project.
Despite Gensler’s lack of clarity surrounding Ethereum, he has maintained that Bitcoin is n0t a security back then and today. “Bitcoin came into existence as mining began as an incentive in validating a distributed platform,” he said in 2018. The SEC has since approved the first Bitcoin-related exchange traded funds tied to the Chicago Mercantile Exchange’s Bitcoin futures prices under Gensler’s leadership.
Gensler’s refusal to confirm or deny his thoughts on how other crypto assets would be classified could cause concern for believers in the technology. It also suggests that assets built on top of Ethereum—such as the DeFi tokens Gensler has called out in the past—could be subject to regulatory action in the future.
It is also noteworthy that the SEC’s decision on whether a token is a security is subject to change. Last month, the Bitcoin-focused project Stacks said that the SEC had changed its classification from a security token to a non-security once it had demonstrated that it was sufficiently decentralized.
Disclosure: At the time of writing, the author of this piece owned ETH and other cryptocurrencies.
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On December 30, the US Security and Exchange Commission (SEC) Chairman Gary Gensler hired new staff to offer advice related to crypto policy-making and inter-agency work.
The SEC chair stated that Corey Frayer is set to join Gary’s executive staff as a senior adviser on the agency’s oversight of cryptocurrencies assets during the Thursday announcement. Before joining Gary’s executive, Corey worked as senior adviser to members of congress. He later became a senior staffer on the US senate committee on banking, housing, and urban affairs under Senator Sherrod Brown’s committee chairman.
Additionally, other individuals appointed into SEC chairs executive staff are Philipp Havenstein, Jennifer Songer, and Jorge Tenreiro. They will be working as operations counsel, investment management counsel, and enforcement counsel, respectively.
The SEC chairman is one of the most informed people on matters regarding crypto and blockchain technology. Hence, the appointment of Frayer to his staff could affect Gensler’s public position on crypto-related policy changes. The SEC chair has also expressed concerns regarding exchange-traded funds exposed to cryptocurrencies such as Bitcoin.
Gensler is focused on establishing a regulatory framework for crypto, and there is also a signal that SEC could step up its efforts to regulate the industry in 2022. Such a move is in line with Gensler’s appointment as a crypto-focused senior adviser.
The U.S.President Joe Biden now has an opportunity to pick financial experts who will greatly influence policies related to crypto. He will be doing so since the SEC leadership is set to change in 2022 after the departure of commissioner Elad Roisman in January and the expiration of commissioner Allison Lee’s term in June.
Crypto Will Get Tougher Rules
In his new job as Wall Street’s top cop, Gary Gensler has become a guiding principle as he vows to bring a more muscular and tougher approach to supervision at a critical time for markets. During the pandemic, millions of amateur investors have begun trading stocks for the first time, thanks to trading apps like Robinhood. They have teamed up together on the social network Reddit to push the prices of meme stocks, including GameStop. They have also embraced crypto coins and trendy investments such as SPACs, which have become a popular way for private firms to bypass traditional initial public offerings.
That worries Gensler, who states that such amateur investors may not be adequately protected. Under his leadership, the SEC has unveiled several high-profile investigations. Recently, the agency launched many proposals, including potential restrictions on how executives can trade on their own companies’ stocks as well as a push of enhanced disclosures about corporate buybacks. There is a lot to come, much of it linked to enhancing the protections of average investors. Especially, stricter rules are coming for cryptocurrencies.