Gensler Loses Key Bitcoin Battle: A Crypto Legacy Unraveled

Gary Gensler, the chair of the US Securities and Exchange Commission (SEC), has faced a pivotal moment in his crypto legacy. In a surprising move, he cast the deciding vote that approved 11 Bitcoin spot exchange-traded funds (ETFs), marking a significant milestone in the world of cryptocurrency. However, this decision leaves Gensler, often referred to as the “crypto cop,” with a shaky reputation regarding digital assets.

Under Gensler’s leadership, the SEC earned a reputation for its stringent approach, taking legal action against major players in the crypto industry. Platforms like Kraken, for instance, felt the regulator’s impact, discontinuing its staking program in the US and paying a hefty $30 million settlement in February of the previous year. Additionally, Kraken faced separate charges filed by the SEC in November, alleging that it operated as an unregistered securities business. The agency’s ongoing lawsuits against Coinbase and Binance, two crypto giants, are further proof of its strict stance.

However, despite Gensler’s previous opposition to Bitcoin spot ETFs, this recent decision has turned the tide. It raises questions about his credibility and the SEC’s overall reputation. Dennis Kelleher, CEO of Better Markets, expressed concerns that this move might undermine the SEC’s credibility.

The primary argument against Bitcoin spot ETFs was the cryptocurrency’s trading on largely unregulated markets, making it susceptible to price manipulation. This viewpoint was challenged when a judge in Washington DC criticized the SEC for treating Bitcoin spot and future products differently, calling it “arbitrary and capricious.” The SEC had already approved Bitcoin futures ETFs, which track the price of futures traded on regulated exchanges like CME in Chicago. This discrepancy prompted the SEC to reconsider its stance.

While Bitcoin ETFs may seem like a significant step forward, some argue that it changes little. Hilary Allen, a professor of financial regulation at American University, believes that Bitcoin remains the same in an ETF, with all its inherent volatility and manipulability. For those unfamiliar with the crypto market, it may convey a false sense of legitimacy.

The crypto world has seen its fair share of chaos, especially in unregulated exchanges, which have been Bitcoin’s natural habitat since its inception. Recent scandals involving FTX and Binance, the world’s largest crypto exchange, have highlighted the need for regulation and oversight.

In the end, Gensler’s crypto legacy remains uncertain. While he has ushered in a potential wave of new investments in the crypto sector, it’s unclear whether he has won the support of the crypto community. As one expert noted, crypto enthusiasts may appreciate the role of the courts more than Gensler in shaping the industry’s future.