Gensler Makes Final Pitch on SEC Crypto Rules

Gary Gensler is making a final pitch for how the SEC should be allowed to regulate cryptocurrency markets ahead of the incoming Trump administration and its enthusiasm for digital assets.

In remarks prepared for a Thursday legal conference in New York, the Securities and Exchange Commission chair repeated that the agency should be focused on “rules of the road” that apply to crypto sales and intermediaries, such as brokers and exchanges, to promote proper disclosure.

The experience of the Great Depression, where so many investors were wiped out and the economy went into a tailspin, taught policymakers about the importance of “provisions about disclosure because information about securities creates a public good,” Gensler said at the Practicing Law Institute’s annual securities regulation conference.

Gensler reaffirmed that Bitcoin itself isn’t a security, a position taken by his predecessor during the first Trump administration, Jay Clayton.

“Our focus, rather, has been on some of the 10,000 or so other digital assets,” that total up to about $600 billion, less than 20% of the crypto market when Bitcoin, Ether and stablecoins are carved out, he said.

Waning Days

Gensler commented as the clock begins to run out on the current administration, and perhaps on his approach to regulating crypto. The next Republican administration at the SEC likely won’t share his view of the digital asset industry as being rife with noncompliance, or that participants must abide by the same decades-old securities rules as traditional exchanges and issuers.

President-elect Donald Trump has pledged to create a friendly regulatory framework for crypto, set up a strategic Bitcoin stockpile and make the US the global hub for the industry. A onetime crypto skeptic, Trump changed tack after digital-asset firms spent heavily during election campaigning to promote their interests.

The Heritage Foundation’s Project 2025 has vowed to significantly whittle the size and powers of the SEC watchdog. While Trump has distanced his policy views from Project 2025, some of his allies, such as Elon Musk, have vowed to undertake similar plans through the newly announced Department of Government Efficiency.

“Elections have consequences, and they should,” Gensler said. “I am proud to continue on Chair Clayton’s leadership,” he said. “We didn’t actually differ that much,” referring to the lack of disclosures from the industry and crypto intermediaries not separating out their different business lines.

Court Cases

Gensler touted the SEC’s legal wins on crypto-related investment products. “Court after court has agreed with our actions to protect investors and rejected all arguments that the SEC cannot enforce the law when securities are being offered — whatever their form,” he said.

Far fewer crypto enforcement cases may soon make their way to court, however. The agency’s two Republicans, and whoever is nominated and confirmed to lead the agency, are likely to reverse what many in the industry view as an enforcement blitz against firms for failing to register their platforms or their tokens.

Already, the two Republican commissioners have been discussing how to divvy up control of the SEC’s portfolio until a final chair is confirmed, according to multiple people familiar with the matter. Some of the scenarios would see Mark Uyeda, the more junior of the two, named acting chair by Trump, while Hester Peirce, affectionately dubbed “Crypto Mom” by digital asset fans, would hold full executive powers on matters specific to crypto, the people said, who asked for anonymity to describe the private talks.

All such scenarios would be subject to Trump’s final decision-making. Representatives for Peirce and Uyeda declined to comment.

Other personnel changes are afoot as well, with some top Gensler officials planning their departures. Jessica Wachter, the head of the Division of Economic and Risk Analysis, and Haoxiang Zhu, head of the Division of Trading and Markets, are leaving in December to resume teaching at the Wharton School of Business and at the Massachusetts Institute of Technology, respectively.

Both universities confirmed the officials were returning in January.

DERA plays a hand in SEC rulemaking by providing economic impact and compliance cost estimates, among other analyses. Zhu’s division has tackled massive rethinks of market structure. Some of those efforts are resulting in significant changes for global markets and may boost financial resiliency in the next crisis, such as measures to centrally clear US Treasuries trading or shortening the equities settlement cycle.

Other major projects likely won’t be finalized, including new best-execution requirements for equities trading and the concept of submitting trade orders to auctions between exchanges and wholesalers like Citadel Securities and Virtu Financial Inc.

Wachter and Zhu didn’t respond to requests for comment. An SEC representative said the agency doesn’t comment on personnel matters.

Credit: Adam Auel

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