As if the egg on his face wasn’t enough, Gary Gensler also has sour grapes. An hour after the US Securities and Exchange Commission (SEC), the agency he chairs, approved just under a dozen Bitcoin ETFs, Gensler issued a statement making it very clear that the move is not at all an endorsement of Bitcoin (BTC).
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“Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to cryptocurrencies,” he chose to end his personal statement. This is nothing new for the US’s top securities cop, as Gensler has repeatedly said that cryptocurrencies have failed to prove their societal value.
Not to mention, BlackRock, the world’s largest asset manager, reignited interest in bitcoin last year, during the depths of the bear market, when it applied to list a bitcoin spot exchange-traded fund (ETF) based on apparent consumer demand for such a product. . Soon after, the SEC was filing at least a dozen more ETF applications, and the price of Bitcoin was soaring.
Perhaps what’s worse for Gensler is that the demand is real: BlackRock’s iShares Bitcoin Trust (IBIT) is on track to achieve a historic $3 billion in capital inflows on its first day of trading, not to mention its competitors. The sheer number of thematic cryptocurrency funds launched this week is unprecedented, demonstrating the high level of interest from financial service providers.
As James Angell, a professor at Georgetown University, told CoinDesk via email, the SEC, by denying it for so long, may have played a role in driving demand for bitcoin ETFs. As of Wednesday, the agency had rejected at least 20 such requests, which amounted to free indirect marketing, Gensler noted.
In his letter, Gensler notes that he would likely have preferred that the current crop of Bitcoin ETFs not launch at all. But he was forced to do so after an appeals court in Washington, D.C., rebuked his agency’s “arbitrary and capricious” reasoning for rejecting Grayscale’s plans to convert the GBTC trust fund into an exchange-traded fund.
Gensler doesn’t sound particularly nice when telling the story, saying that only after the SEC ran out of options to deny more bitcoin ETF applications did it become clear that “the most sustainable path forward” was to finally approve them.
Furthermore, Gensler does not appear to be “merit neutral” (which is how the SEC describes its role in regulating markets) when making a comparison between Bitcoin and gold, saying that one is a commodity with industrial and consumer use and the other is primarily used. For ransomware, money laundering, sanctions evasion and terrorist financing, when not purely speculative.
There is approximately $16 trillion of capital in gold ETFs today, which is an indication that gold may just be a speculative tool as well. All that aside, the SEC in recent months has gone out of its way to point out cybersecurity risks related to cryptocurrencies, which appear to be an integral part of its broader push to bolster corporate security protocols.
Gensler has made “security a pillar of his agenda, adopting stricter rules to expand detection of cyber incidents committed by companies and penalizing companies for misleading investors about their cybersecurity practices,” the Financial Times reported. The agency even posted public service announcements on social media about best practices for password protection.
All of this makes the agency’s “security incident” on Tuesday — when an unknown actor “hacked” the SEC’s Twitter/X account to post about bitcoin ETFs — all the more embarrassing. According to the “Integrity” team investigating X, the SEC did not turn on binary protection. So much for Gensler’s PSAs.
It was such a bizarre incident that I wonder if it was an inside job, and perhaps it was Gary’s latest attempt to prove that Bitcoin markets can be manipulated so that he can once again delay the inevitable. (Bitcoin ETFs are often rejected due to market manipulation concerns.)
It’s just that, since bitcoin is considered a commodity, the hack might be investigated by the SEC’s sister agency/rival, the Commodity Futures Trading Commission, which would be a severe embarrassment to Gensler, who used to hold the top job there. In fact, several US senators have already called for an investigation into the “widespread confusion” caused.
So, if you’re following along at home: The agency with the triple mission of protecting consumers, promoting capital formation, and ensuring fair markets has taken the embarrassment of trying and failing to prevent the launch of a much-needed product, been chewed up in court multiple times for unfair reasoning and outdone itself By not following her cybersecurity advice.
Gensler came out swinging when he entered office, quickly dispelling any notion that the former MIT professor who taught about blockchain would be a favor to the industry. Early on, the whole shebang was called the “theatre of decentralization.” It turns out the only clown in this show is him.