Before the Trump administration took office, Gary Gensler provided a personal commentary on SEC regulation and discussed the cryptocurrency industry. How did he view the cryptocurrency industry at this final moment?
Written by: Gary Gensler
Translated by: Nicky, Foresight News
Two years ago, when I communicated with everyone here, I quoted a famous saying from President Franklin D. Roosevelt when he signed the first foundational securities law in 1933: "This law and its effective execution is a step in restoring some old-fashioned standards of integrity."
This year, I will talk about the topic of effective execution. As usual, I want to point out that the following views only represent my personal opinions as the Chairman of the Securities and Exchange Commission and do not represent the opinions of other commissioners or staff.
I believe that for the past 90 years, our securities laws have made significant contributions to the tremendous success of the nation's economy. The enactment of securities laws has benefited both investors and issuers while helping us build trust in our capital markets. These laws have also helped reduce costs and lower risks.
The results are reflected in the scale, scope, and depth of our capital markets. Today, our capital markets exceed $120 trillion, forming part of the nation's comparative advantage, supporting the dominance of the dollar, and underpinning our role globally. We are the preferred capital market for global issuers and investors, accounting for over 40% of the global capital market, despite representing only 24% of the world economy, achieving the remarkable feat of gaining significant influence with a smaller size.
None of this is accidental.
President Roosevelt and Congress understood in the 1930s that well-regulated markets could build trust and create conditions for economic success.
Subsequent presidents, including Richard Nixon, Gerald Ford, Ronald Reagan, Bill Clinton, George W. Bush, and President Obama, as well as Congress, have repeatedly recognized this when updating securities laws to best promote our capital markets and economic success.
One way I think about this issue is by comparing it to common-sense rules in driving or football games.
For many years, whenever any of my three daughters borrowed the car keys, I could sleep soundly because I knew that common-sense traffic rules were protecting them. These rules include stop signs, traffic lights, speed limits, and laws against drunk driving. The police patrolling the streets ensure that these rules are enforced, allowing my daughters to drive safely, and I can rest easy because of it.
These traffic rules not only help reduce driving risks but also promote economic prosperity. Imagine if there had been no traffic lights and speed limits a hundred years ago; American automakers might not have achieved such remarkable success because these regulations allowed American consumers to trust this emerging product.
Similarly, as we enjoy the excitement of football games this fall, imagine what it would be like if the National Football League (NFL) had no game rules at all? Without referees maintaining order on the field, chaos would ensue, and players would be injured as a result.
These common-sense rules in football not only provide safety for players but also build fans' confidence in the fairness of the game. Therefore, the existence of rules and referees is a crucial factor in driving the continuous development of the game.
The same is true in finance; common-sense rules can reduce risks and build trust among market participants.
When President Roosevelt and Congress enacted securities laws in the 1930s, they had experienced the 1920s, a time when con artists, fraudsters, scam artists, and Ponzi schemers exploited investors for personal gain. They learned the lessons of an unregulated market left to its own devices. In the following decades, as technology and business models evolved, subsequent presidents repeatedly witnessed similar benefits from strengthening market regulation.
They also understood that "traffic rules" should not be limited to preventing fraud. Congress recognized the importance of securities information to the public interest and thus established a series of key provisions regarding information disclosure. At the same time, they set important regulations on corporate governance to ensure the proper functioning of businesses. For intermediaries, Congress also placed great emphasis on establishing important provisions regarding conflict of interest management, information disclosure transparency, and codes of conduct. These regulations aim to protect investor interests and maintain fairness and justice in the market. Additionally, there was a particular focus on the role of gatekeepers, such as investment banks and auditors, with corresponding provisions to ensure they play a positive role in the capital markets, maintaining market stability and security.
Cryptocurrency Market
When I joined the SEC in 2021, then-Chairman Jay Clayton had already initiated about 80 lawsuits against participants in the cryptocurrency market who did not follow basic rules, with the Ripple case being one of them.
Chairman Clayton and his commission frequently discussed these emerging markets, and just three months into his tenure, the commission released the DAO Report. The SEC has always remained vigilant to ensure that entities issuing or selling securities comply with our time-tested securities regulations. Since 2018, this type of enforcement work has typically accounted for 5% to 7% of our overall work.
Multiple courts have supported our actions to protect investors, dismissing all arguments regarding the SEC's inability to regulate different forms of securities issuance.
It is worth noting that not all assets are considered securities. Both former Chairman Clayton and I have made it clear that Bitcoin does not fall under the category of securities, and the commission has never regarded it as such. Our focus has always been on certain assets among approximately 10,000 other digital assets, many of which have been determined by courts to be securities. With that in mind, aside from Bitcoin, Ethereum, and stablecoins, the remaining portion of the cryptocurrency market is approximately $600 billion, accounting for less than 20% of the entire cryptocurrency market and only about 0.25% of the global capital markets.
Here, I want to emphasize two points:
First, parties issuing or selling securities to the public must register and fully disclose relevant information to the public. Second, intermediaries—including broker-dealers, exchanges, and note exchanges—must register and be subject to appropriate regulation regarding conflicts of interest, information disclosure, and business conduct.
Before I joined the commission, at the request of SEC staff, many applications for Bitcoin exchange-traded funds (ETFs) and products (ETPs) had been rejected or withdrawn. However, shortly after I joined in 2021, the first Bitcoin futures ETF was approved after discussions with commission staff. While we initially followed the previous administration's approach regarding ETPs holding physical Bitcoin, the commission approved ETPs for physical Bitcoin and Ethereum earlier this year. Compared to the non-compliant cryptocurrency market, investors in these products enjoy transparency in disclosure, strict regulation, lower fees, and greater market competitiveness.
Over the years, this field has caused significant harm to investors. Moreover, aside from speculative investments and potential involvement in illegal activities, the vast majority of crypto assets have yet to prove their sustainable utility.
Everything we do is to ensure compliance with the law. Since the 1930s, we have always believed that compliance is crucial. It protects investor interests, builds trust in our capital markets, and helps issuers enter the market smoothly. Ninety years of history have shown that strong securities regulation can both establish market trust and drive innovation.
Reflections
My parents, Sam and Jane Gensler, never entered the financial industry and did not even complete college. However, when they invested their hard-earned savings in the securities market, our entire family benefited from those common-sense market rules.
The SEC has fostered the establishment of trust by effectively managing well-regulated securities markets. This is precisely why investors and issuers enthusiastically flood into the market, much like fans watching a football game. This also forms the cornerstone of the stable development of the world's largest capital market. It is for this reason that our country has achieved tremendous economic success over the past 90 years.
I am immensely proud to work alongside my colleagues at the SEC. They stand guard on the financial highway day in and day out, protecting the financial security of every American family.
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