Gary Gensler: The Crypto Lightning Rod Who Runs the SEC

No regulator or law enforcement official had as much influence on crypto this year. But is the SEC chair singled out too much by critics?

AccessTimeIconDec 4, 2023 at 12:44 p.m. UTC
Updated Mar 8, 2024 at 6:02 p.m. UTC

Assessing who was the most influential regulator or law enforcement official in a year when so many have affected or shaped the crypto industry is challenging.

But influence is not just measured by action and impact; it's the reactions caused, the responses garnered, the way we hang on to words said and left unsaid that demonstrate influence. Using this criteria, there's really only one winner: SEC Chair Gary Gensler.

This profile is part of CoinDesk's Most Influential 2023. For the full list, click here.

The longtime regulator, former banker and one-time academic is tasked with one of the more difficult jobs in the U.S. crypto-regulatory sphere: He runs the U.S. Securities and Exchange Commission, an independent federal markets regulatory agency tasked with protecting American investors and enforcing guardrails over U.S. capital markets – of which the $1 trillion crypto sector is only a tiny fraction.

Gensler is a controversial figure within and outside crypto circles. Politicians who disagree with his views and actions have introduced bills to defund parts of his agency and cut his salary.

"He could withdraw the SEC's lawsuit against Ripple Labs, approve the U.S.' first bitcoin exchange-traded fund (ETF) and provide clarity for businesses hoping to launch and trade a crypto token compliant with federal law without having to endure the SEC's expensive and time-consuming registration process," I wrote in 2021, the first time Gensler was named to CoinDesk's "Most Influential" list.

In 2023, the SEC won a partial victory (or suffered a partial loss, depending on how you look at it) in its case against Ripple. A spot bitcoin ETF is still just a dream in the eyes of issuers and exchanges, though hope that one may be approved as soon as next month has never been higher. And while the SEC has been publishing guidance (or at least proposed rules) and sharing hints about how it would enforce securities laws in crypto, it hasn't quite matched industry hopes of a bespoke model that would allow the vast majority of tokens to trade on U.S. platforms (or deem these tokens not securities).

"I think there's been progress, and I think the lawsuits have been helpful," said one employee of a crypto company with business before the regulator (hereafter "first person.")

CoinDesk spoke to multiple individuals for this article; all have been granted anonymity due to their work before the agency. Two of them pointed out that crypto, as attention-grabbing as it is, likely isn't one of the bigger issues the SEC has to deal with. In 2023 alone, the SEC has published rules or proposed rules addressing the Privacy Act, cybersecurity, conflicts of interest, climate disclosures, swap execution facilities, beneficial ownership and more.

"Crypto is only one small part of that larger [mandate]," the first person said. "How do you balance all of that when industry participants and journalists struggle with keeping up?"

Crypto enforcement

Rules aside, Gensler's vision for how crypto should be regulated seems pretty clear: If you're operating a crypto trading platform – an exchange, in industry parlance – and you've listed certain tokens (basically anything that isn't bitcoin), you need to separate out your brokerage function from your clearinghouse function from your exchange function. Crypto trading in the U.S. should be similar to other securities trading in the U.S.

Settlements with Beaxy and Bittrex, and lawsuits against Coinbase, Binance and Kraken have all angled toward that basic idea.

"The role of the SEC as a disclosure-based regulator is to protect investors. He has definitely over-indexed on enforcement," the first person said. "I think some of the criticism at him using these enforcement actions as publicity stunts is fair, but that dovetails with I think he has a tough job."

One of the chief industry complaints about the SEC – under both Gensler and his predecessor Jay Clayton – is the use of enforcement actions in lieu of explicit rulemaking or guidance that companies can use as a bright lines test. This idea that crypto exchanges should partition out these different types of businesses in an industry where it's unclear if doing so is even technologically possible has only further stoked ire against the federal regulatory agency.

The tone coming from the top of the agency "really matters," a second person, an attorney in crypto, told CoinDesk. "Most of the griping about Gensler is that he has substantive points but the way he [talks to the industry seems gleeful]."

"He's got a clear policy agenda and that's what he cares about the most and that's to his credit, he cares about it," this person said. "He will be rougher than other heads to get what he wants."

And it has been a rough year in crypto. Just over a month ago, a former titan of industry was convicted of fraud and conspiracy tied to the collapse of FTX. Before his exchange fell apart, Sam Bankman-Fried was active in Washington, D.C., meeting with Gensler and his Commodity Futures Trading Commission (CFTC) counterpart Rostin Behnam, as well as influential lawmakers in both the Senate and House of Representatives. Last month, the world's biggest exchange, Binance, pleaded guilty to violating various anti-money laundering and related laws in cases brought by multiple agencies (though not the SEC).

The industry has also seen billions of dollars stolen from decentralized finance and other crypto projects worldwide over the past 11 months. While SEC regulations perhaps wouldn't protect investors using DEXs outside the U.S., a number of regulators are raising alarm bells over the hacks happening and subsequent laundering of funds.

"If the industry wants to move forward, there needs to be a mechanism by which to sort of exorcize [violations]," said a third person, another attorney whose company has business before the SEC.

One of many

Gensler, as the head of the SEC, also bears the brunt of the public outcry against his agency, but that may not be a fair reaction, some of the people CoinDesk spoke to suggested.

"I think he catches a lot of flack for things that were not in his doing. He didn't bring the Ripple case. I don't think he brought" the special-purpose broker-dealer rule either, the third attorney told CoinDesk, referring to two of the controversial actions the SEC has engaged in over the past few years.

"You have a man who gets a lot of attention but we forget a leader is not a leader without a great team," the first person said.

The second person took a different view: while Clayton – like Gensler – said repeatedly that "a lot of" crypto looks like investment contracts, but Clayton – unlike Gensler – "also said the way to go forward is to do something that doesn't leave the ecosystem high and dry."

That path forward, outside what's been shown through the SEC's enforcement actions, remains incredibly unclear.

"As an industry, it's really important to strike the right balance between calling out professional disagreements that policymakers may not get and also as an industry I think we should. We have a responsibility to help people appreciate this asset class," the first person said.

Edited by Ben Schiller.


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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.