Gary Gensler remains firm on SEC enforcement approach

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler appeared to double down on the agency’s tough stance on cryptocurrency regulation.

In a recent interview with Bloomberg, he reiterated that the SEC would continue its much-maligned enforcement-focused approach, rooted in existing securities laws, despite growing backlash from the crypto industry and legislators.

Commission stands firm on crypto regulation

Speaking to Ed Ludlow and Caroline Hyde on October 22, Gensler reiterated that the commission’s top priority remains investor protection. He cited several cases where people lost money in the crypto market due to poor disclosure practices, while stating that decentralized technologies are not inconsistent with established securities regulations.

The SEC’s approach has sparked controversy, with many criticizing the regulator for stifling innovation by relying on outdated rules, including the Howey test, first used in 1946. The authority routinely applies this test to determine whether a cryptocurrency transaction qualifies as an investment. contract, which would subject it to U.S. securities laws.

Despite the condemnation, Gensler remained steadfast, emphasizing that regulations based on historical precedent offer the best path forward to protect crypto investors while promoting the integrity of the industry.

Additionally, the agency has signaled its intention to continue closely monitoring crypto. Its review division recently released its priorities for 2025, highlighting Bitcoin and Ethereum spot exchange-traded products (ETPs) as key areas of focus.

This specificity constitutes a marked change from previous years, where the regulator only broadly referred to cryptography without distinguishing between individual products.

Questions about Gensler’s future

Criticism of the former MIT professor’s stance on crypto has extended to politics. However, in the Bloomberg interview, he managed to evade questions regarding his future as head of the SEC in the event of Donald Trump’s return to the White House.

Although his term doesn’t end until 2026, some believe the 2024 elections could potentially impact the makeup of the financial watchdog’s senior staff, with Gensler particularly in the crosshairs.

Trump publicly said he would fire the commission head “on day one,” calling the Democratic nominee’s tenure “disastrous” for crypto. The 67-year-old declined to engage in speculation but acknowledged that any change in direction would require Senate approval.

If the Republican presidential candidate were to win, he could replace Gensler with someone deemed more receptive, such as Commissioner Hester Peirce, a longtime advocate for a more crypto-friendly regulatory approach.

Conversely, some experts believe that while a Kamala Harris victory doesn’t immediately knock Gensler out of the picture, it could still lead to a softer stance on the sector.