Author: Weilin, PANews

Only 6 days remain until Donald Trump is inaugurated as the President of the United States. On January 14, SEC Chairman Gary Gensler gave consecutive interviews to CNBC and Yahoo Finance, with his leadership style and policy legacy becoming hot topics of discussion. Previously, Gensler announced that he would resign from his position as SEC Chairman on January 20.

Based on these two interviews, PANews has compiled 11 important questions regarding cryptocurrency and capital markets, along with Gensler's responses.

1. On January 14, the 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 ensure that capital markets operate for them, protect investors, and ensure compliance with the law. We have an important responsibility, and we will fulfill that responsibility, regardless of who is in leadership. There will be a transition of leadership this week and next, but we will continue to ensure that capital markets serve investors and that market participants comply with the law.

That is our job. Essentially, if we do not adhere to the facts and the law, how can we build trust in capital markets? In fact, honest actors in the market will benefit because more investors will be willing to enter and participate in the market.

2. What do you think the next administration means for the SEC? Are you concerned that what you have done during your term will be overturned by the next administration?

The achievements we have made during this administration are significant. I took office after the GameStop incident, during a peak period for special purpose acquisition companies (SPACs), and we implemented some of the most important reforms in the stock market. I would say that we completed these reforms in a unanimous and bipartisan manner with other commissioners. We also made significant reforms in the treasury market. I cannot imagine anyone wanting to revert to longer settlement periods; we shortened the settlement period to one day.

I also cannot imagine anyone wanting to withdraw the first federal privacy notice to the public, which states that if your information is leaked by an investment advisor or broker, you will be notified. I dare say that I do not think anyone would want to roll back these measures. They would not make it easier for insiders to trade on significant non-public information. So, I am very satisfied with the work we have done.

Of course, democracy has its outcomes, and the next team may choose a different direction, but I believe these are all good policies that lower costs and promote integrity in 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 capital markets is important; people need to comply with the laws passed by Congress, and this great institution is responsible for enforcing those laws. Think about it: we have rules on the highway, we have traffic lights, and we have police officers. If you are driving a hybrid car on the highway, does it not need to comply with traffic laws? Or does an electric vehicle not need to follow the rules on the highway? We enforce the law consistently in financial markets, and the cryptocurrency space 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 concerns. I do not see any evidence that cryptocurrency was a major factor influencing voter decisions.

4. You have achieved a lot during your term, mentioning the shortening of settlement periods and reforms in money market funds and the treasury market. However, you lost 4 out of 5 challenges to your rules, a number that exceeds the total of the previous three chairpersons. Is there anything you wish you could have done differently?

For anyone working in government, this is an interesting time because the courts are undergoing significant changes. The great hockey player Wayne Gretzky once said something along the lines of, you should skate to where the puck is going, not to where it has been. Here, the courts are like the puck; where are they heading? They are reinterpreting the law, whether it is environmental law, communications law, health law, or securities law.

We have been acting according to the law, working based on the laws passed by Congress. We have established 46 rules that are very important to capital markets, the vast majority of which have not only been passed but are also being implemented. So, people can now benefit from these rules, such as knowing whether company executives received compensation based on erroneous financial reports and whether that information needs to be recouped. As you mentioned, we have made reforms in the money market space, but at the same time, the SEC can now obtain better information about private funds. So, we have achieved a lot together.

5. You have repeatedly warned about the risks of cryptocurrency. Over the past year, the courts have somewhat forced you to approve spot Bitcoin and Ethereum ETFs, opening up cryptocurrency investments to the public. Do you wish for a different outcome? Are investors facing greater risks as a result?

Bitcoin itself is not a security; neither I nor my predecessors have said that Bitcoin is a security, nor have we said that Ethereum is a security. I believe that investors in Bitcoin and Ethereum, including the general public you mentioned, had the opportunity to invest long before ETF products came along. The approval of Bitcoin ETFs during my term was for a spot ETF, which was launched later. Investors are better protected in spot trading products, with lower fees, stricter regulation, market monitoring, and these products are registered and compliant with SEC requirements. My predecessors had previously rejected these products, and we followed the leadership approach of J. J. Clayton. Bitcoin and Ethereum account for 70% to 80% of the cryptocurrency market. What I am really concerned about is the other parts, those thousands of tokens, which continue to exist under conditions where investors are essentially investing, or betting on a project, and they need to receive proper disclosures. The law requires that you should receive such disclosures, but currently, these tokens are not compliant. I do not prejudge any project.

6. You seem intent on separating Bitcoin from the rest of the industry. Have you begun to develop a new view of Bitcoin? Do you believe Bitcoin has intrinsic value and serves as a store of value? Or do you think that looking back in 10, 15, or 20 years, it will be seen as the tulip bubble of the 18th century? You taught at MIT, so you should have some insights; have you read "The Bitcoin Standard"?

It is hard to predict. I know how you view these other coins, and I know you have a negative perspective. But as for Bitcoin, the SEC has never said it is a security.

Yes, (I have read it), and I believe Bitcoin is a highly speculative and volatile asset. But there are 7 billion people in the world, and everyone wants to trade it. Just as we have had gold for 10,000 years, we now have Bitcoin, and perhaps in the future, there will be other similar things. These other thousands of projects need to demonstrate their use cases and prove they have real fundamentals; otherwise, they will not be sustainable.

7. Do you not like those other coins?

I have never owned those coins, and I have maintained that stance for 7 or 8 years.

8. What do you think about the concept of prediction markets, especially Kalshi hiring Trump’s son as an advisor?

I have no opinion on who others hire. But the capital markets themselves are vast, with a $120 trillion capital market, whether it is stocks, bonds, or ultimately prediction markets, it is all about predicting future cash flows or forecasting future opportunities for businesses. Therefore, these markets, in a sense, are all about prediction markets, which is also why I am proud of some of the reforms we have implemented. We have established better information disclosure to ensure that only meaningful information is disclosed to investors so they can make their own judgments about the future based on that information.

9. Critics argue that the SEC relies too much on litigation rather than legislation. What is your view?

We have laws. Congress has passed these laws, and of course, they can change. But part of the cryptocurrency space involves the public investing based on these projects, many of which are regulated under securities law. In this space, many companies are not complying with the regulations. Most of what you discuss daily revolves around stocks, bonds, or a combination of market fundamentals, valuations, and sentiment. The cryptocurrency space seems to rely more on sentiment, with much less emphasis on fundamentals. But if there are fundamentals, and I say if, then appropriate disclosures need to be made under securities law. That is the basic trading rule.

10. What do you think is the biggest risk in the current market?

We are currently in a presidential transition period, and democracy has been reflected. Certain policies will become clearer over time, but there is certainly uncertainty regarding policies. Over the past four years, I have also mentioned that there are areas in capital markets with a lot of leverage, a lot of borrowing, and low margin situations. Typically, these issues arise in the so-called repo market where commercial banks provide leverage to macro hedge funds. Ultimately, I believe that artificial intelligence has transformed productivity and positively impacted various fields, but there are still some risks in the future.

11. If you could do it all over again, what different decisions would you make?

I wish we could have completed the reforms in the treasury market and stock market earlier, and that the related issues with the courts could have been handled more smoothly. It is worth noting that the attitude of the courts is undergoing drastic changes. I really wish I could better predict these changes so that we could do things that would better address the challenges posed by the courts.

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