By Weilin, PANews
There are only 6 days left until the inauguration of US President-elect Donald Trump. On January 14, Securities and Exchange Commission (SEC) Chairman Gary Gensler was interviewed by two media outlets, CNBC and Yahoo Finance, and his leadership style and policy legacy became a hot topic. Previously, Gensler had announced that he would resign as SEC Chairman on January 20.
Based on these two interviews, PANews sorted out 11 important questions about cryptocurrencies and capital markets, and how Gensler responded to them.
1. On January 14, the US Securities and Exchange Commission (SEC) took action against Robinhood and some private equity firms. With less than a week left in your term, can we expect more actions from the SEC?
We are entrusted by the public to make sure that the capital markets work for them, to protect investors and to make sure that people follow the law. We have an important responsibility and we will meet that responsibility regardless of who is in leadership. There will be different leadership transitions this week and next week, but we will continue to make sure that the capital markets work for investors and that market participants follow the law.
That's our job. Essentially, if you don't follow the facts and the law, then how do you build trust in the capital markets? In fact, the good faith actors in the market benefit because more investors are willing to come into the market and participate.
2. What do you think the next administration will mean for the SEC? Are you worried that what you did during your tenure will be reversed by the next administration?
What we have accomplished during this administration has been remarkable. I came in after the GameStop incident, at the height of a bunch of special purpose acquisition companies (SPACs), and we implemented the most important reforms in the stock market. I will say that we, along with the other commissioners, accomplished this reform in a consistent and bipartisan way. We also made significant reforms in the Treasury market. I can't imagine anyone wanting to go back to longer settlement cycles, we shortened settlement cycles to one day. I also can't imagine anyone wanting to withdraw the first federal privacy notice to the public that says if your information is compromised by an investment adviser or broker, you will be notified. I dare say I don't think anyone wants to withdraw those measures. They don't make it easier for company insiders to trade on material nonpublic information. So, I feel very good about the work we did. Of course, democracy has its consequences, and the next team may choose a different direction, but I think these are good policies to reduce costs and promote integrity in the capital markets. 3. Some people believe that cryptocurrency supporters helped Trump win the latest election. How do you respond to these views? Building trust in the capital markets is important, and people need to abide by the laws passed by Congress and this great institution enforces those laws. Think about this, we have rules on the highway, we have traffic lights, we have patrol officers. If you are driving a hybrid car, on the highway, does it not need to obey traffic laws? Or does an electric car not need to obey regulations on the highway? We also enforce the law in the financial market in a consistent manner, and the cryptocurrency field is not compliant.
I would also say that voters are smart enough to know that they vote based on other issues, such as inflation or other economic issues. I don't see any signs that cryptocurrency is a big factor influencing voters to vote.
4. You have accomplished a lot during your tenure. You talked about shortening the settlement cycle, reforms to the money market fund and Treasury markets, etc. But you lost 4 of the 5 challenges to your rules, which is more than the previous 3 chairmen combined. Is there anything you think you wish you had done differently?
This is an interesting time for anyone working in government because the courts are changing a lot. There was a quote by the great hockey player Wayne Gretsky, but the gist of it is that you should hit the puck where it's going, not where it's at. The courts here are like the puck, where is the court going? They're reinterpreting the laws, whether it's environmental laws, communications laws, health laws, securities laws.
We've been doing our job in accordance with the law, working under the laws that Congress passed. We've enacted 46 rules that are very important to the capital markets, and the vast majority of them have not only been passed, but are already in place. So people can now benefit from those rules, such as knowing whether company executives are being compensated on the basis of false financial reports and whether they need to recover that information. As you said, our reforms in the money market area, but at the same time, the SEC now also has better information about private funds. So we've accomplished a lot together.
5. You've warned many times about the risks of cryptocurrencies. In the past year, the courts have partly forced you to approve spot Bitcoin and Ethereum ETFs, opening up cryptocurrency investment to the public. Do you wish there had been a different outcome? Are investors at greater risk as a result?
Bitcoin itself is not a security, and neither I nor my predecessors have said that Bitcoin is a security, nor have they said that Ethereum is a security. I think that investors in Bitcoin and Ethereum, including the general public as you say, have had the opportunity to invest long before ETF products. The Bitcoin ETF was approved during my tenure, a spot ETF, which was launched later. Investors are better protected in spot trading products, with lower fees, stricter regulation, stock market monitoring, and these products are registered and consistent with SEC requirements. My predecessors had rejected these products, and we followed J. J. Clayton's leadership. Bitcoin and Ethereum account for 70% or even 80% of the crypto market. What I am really concerned about is the other part, those thousands of tokens, and the condition for their continued existence is that investors are essentially investing, or betting on a project, and they need to be properly disclosed. The law requires that you should get such disclosures, but currently these tokens are not compliant. I am not judging any one project in advance.
6. You seem to be intent on separating Bitcoin from the rest of the industry. Are you starting to have a new view on Bitcoin? Do you think Bitcoin has intrinsic value and is a store of value? Or do you think that in 10, 15, 20 years, when we look back, it will be the tulip bubble of the 18th century? You taught at MIT, so you should have some opinions. Have you read the book "The Bitcoin Standard"?
It's hard to predict. I know the way you look at these other currencies, and I know you have a negative view. But as for Bitcoin, we at the SEC have never said it is a security.
Yes, (I have read it), I think Bitcoin is a highly speculative and volatile asset. But there are 7 billion people in the world, and everyone wants to trade it. Just like we have had gold for 10,000 years, we now have Bitcoin, and maybe there will be other similar things in the future. These other thousands of projects need to demonstrate their use cases and prove that they have real fundamentals, otherwise they won't be sustainable.
7. What do you dislike about those other coins?
I've never owned any of these coins, and I've been doing this for 7, 8 years.
8. What do you think of the concept of prediction markets, and specifically Kalshi's decision to hire Trump's son as an advisor?
I don't have an opinion on who other people hire. But the capital markets themselves are vast, $120 trillion capital markets, whether it's stocks, bonds, and ultimately prediction markets, are all about predicting future cash flows, or predicting future opportunities for businesses. So these markets, in a sense, are all about prediction markets, and that's why I'm proud of some of the reforms we've made. We've implemented better disclosures to make sure that only what's meaningful to investors is disclosed so that they can make their own judgments about the future based on that information.
9. What do you think of critics who say the SEC relies too much on litigation rather than legislation?
We have laws. Congress has passed them, and they can certainly change. But part of the crypto space is that the investing public is investing in these projects, and many of these projects are regulated by securities laws. In this space, many companies are not complying with the regulations. Most of the content you discuss every day is about the fundamentals, valuations, fundamentals and sentiment of stocks, bonds or markets. The crypto space seems to rely more on sentiment and much less on fundamentals. But if there are fundamentals, and I mean if, then there needs to be proper disclosure under securities laws. That's the basic trading rule.
10. What do you think is the biggest risk in the current market?
We are in a presidential transition period now, and democracy has been manifested. Certain policies will be clarified over time, but there is definitely policy uncertainty. I also mentioned that in the past four years, there are also some areas of the capital market where there is a lot of leverage, a lot of borrowing and low margin. Usually these problems occur in the so-called repo market where commercial banks provide leverage to macro hedge funds. Finally, I think artificial intelligence has transformed productivity and affected various fields in a positive way, but there are still some risks in the future.
11. If you can do it again, what different decisions will you make?
I hope that we can complete these reforms of the treasury market and the stock market as soon as possible, and that related issues with the courts can be handled more smoothly. It is worth noting that the attitude of the courts is changing dramatically. I really hope to be able to predict these changes better so that we can do something to better respond to the challenges of the courts.
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