Gensler to resign as SEC chair: What happens next under Trump?

As a seasoned observer of the cryptosphere, I am genuinely excited about the potential changes that lie ahead for the U.S. crypto industry. The impending departure of Gary Gensler as SEC Chair opens up an opportunity for a fresh perspective on crypto regulation.

In simple terms, Gary Gensler, a well-known and sometimes divisive leader of the United States Securities and Exchange Commission (SEC), has chosen to step down from his position. His resignation will become official on the same day that President-elect Donald Trump assumes office.

Here’s the announcement on X:

On January 20, 2025 I will be stepping down as @SECGov Chair.

A thread 🧵⬇️

— Gary Gensler (@GaryGensler) November 21, 2024

It’s not surprising that Gensler’s decision came about, given the typical political patterns in Washington. Frequently, leadership changes at federal agencies happen upon the start of a new administration, particularly when there’s a significant change in ideology.

Here’s a closer look at the situation.

Gensler’s crackdown on crypto

Despite the fact that Gensler’s term was supposed to extend until 2026, his resignation coincides with the customary guidelines of political shifts.

During his tenure that started in 2021 under President Joe Biden, Gensler has not had a quiet term. Known for his strong and unyielding regulatory approach, he initiated an unprecedented wave of scrutiny towards the cryptocurrency industry – an area he once characterized as teeming with fraudsters and charlatans.

In 2023, I spearheaded an extraordinary surge of enforcement actions by the SEC against cryptocurrency-associated entities. Remarkably, this number soared to a record-breaking 46, representing a substantial 53% rise compared to the previous year, 2022.

It appears that some legal actions related to cryptocurrencies seem justified based on the circumstances, as demonstrated by the SEC’s lawsuit against Terraform Labs. This case alleged a colossal fraud scheme. In June, a federal court found Terraform and its co-founder Do Kwon guilty. They were subsequently ordered to pay over $4.5 billion in penalties, marking the largest fine ever imposed in a cryptocurrency-related lawsuit.

As a researcher, I’ve observed a mixed response towards Gensler’s actions in the financial industry. On one hand, many appreciate his attempts at establishing order. However, on the other, there are those who criticize him for excessive regulation, claiming it hinders innovation, especially in relation to the ongoing cases against Ripple (XRP) and Coinbase.

As a crypto enthusiast who’s been following the market closely, I’ve taken notice of Trump, who recently entered the crypto space with his family’s startup this year. During his campaign, he openly expressed his disagreements with Gensler and vowed to replace him immediately upon taking office.

Dan Gallagher, the Legal Chief at Robinhood Markets, had been thought of as a potential successor for Gensler. However, he has now expressed disinterest in taking up that role.

With Gensler stepping down as head of the SEC, there are important decisions to be made about the agency’s future course. What impact will this have on financial regulations within the United States? Who will assume control next, and what strategies will they employ that could reshape America’s financial terrain?

Social media reacts

Upon Gensler’s confirmation of his resignation, social media platforms like crypto-focused X, saw an outpouring of posts expressing a mix of strong disappointment and tentative optimism.

Many in the cryptocurrency community were vocal, especially those backing Ripple, often referred to as the “XRP Army.” They have long believed that Gensler was responsible for the Securities and Exchange Commission’s lawsuit against Ripple Labs, which significantly dropped the value of XRP and plunged the community into a protracted legal dispute lasting several years.

One XRP enthusiast posted on Twitter, “Kudos to the XRP Army – this is the opportunity we’ve long anticipated.

Criticism extended beyond XRP, with retail investors calling Gensler’s tenure “the most destructive period in SEC history.” They cite his initial resistance to approving a Bitcoin (BTC) ETF and his handling of smaller investor disputes, such as the MMTLP stockholder case.

Furthermore fueling criticism, the mentioned post also alluded to a federal judge’s alleged censure of the SEC in another legal matter, suggesting that this was indicative of Gensler’s aggressive and contentious leadership style.

Prominent figures from various industries also added their voices to the criticism. Justin Sun, creator of Tron (TRX), expressed a more aggressive stance, stating that Gensler’s resignation came too late and bemoaning the alleged substantial harm he caused to U.S. markets and the global economy.

Ultimately, Gensler’s departure doesn’t merely mark the conclusion of a disputed phase; it signals a crucial shift for the SEC and the sectors it regulates.

Who will lead the SEC next?

As Gensler steps down, attention now turns towards identifying his successor, a choice that could significantly impact the direction of cryptocurrency regulations within the United States.

Eleanor Terrett, a journalist at Fox Business, proposes that the incoming SEC chairman could potentially offer a new perspective regarding cryptocurrencies.

Based on her information, the new administration is focusing on a candidate who supports cryptocurrency (pro-crypto) while also being capable of managing the Securities and Exchange Commission’s (SEC) wider duties. These responsibilities encompass overseeing publicly traded companies, stock and bond markets, as well as private investment funds.

One of the top competitors is Paul Atkins, a previous SEC commissioner who is recognized for his pro-free market ideology and supportive view towards cryptocurrency.

According to Charles Gasparino of Fox Business, Atkins is presently seen as a leading contender, thanks to robust backing from both the corporate and cryptocurrency sectors.

Atkins’ method differs significantly from Gensler’s rigid enforcement approach. Some critics claim Atkins is overly permissive, but his advocates think his governance would foster creativity by easing regulatory restrictions.

One notable contender is Robert Stebbins, who currently works as a partner at Willkie Farr & Gallagher and previously served as the General Counsel of the SEC during Jay Clayton’s tenure.

Stebbins is known for being a reliable and practical contender, bringing extensive legal and regulatory knowledge to the table. Although his support for cryptocurrency might not be as strong as Atkins’s, his past work at the Securities and Exchange Commission lends him credibility among decision-makers and financial organizations alike.

Teresa Goody Guillén is additionally gaining recognition as a possible contender. With years of experience at the SEC and a partnership role at BakerHostetler, she jointly heads their blockchain department.

It’s being said that crypto firms believe she is well-suited for the position due to her combined background as a former SEC official and a proponent of blockchain technology, giving her a unique ability to approach the role with a fair and informed perspective.

Mentioned among potential candidates for important financial regulatory roles, such as the SEC chair, is Brian Brooks, a previous Acting Comptroller of the Currency.

As the “Crypto Controller” due to his supportive blockchain policies while at the OCC, Brooks has consistently advocated for the inclusion of cryptocurrencies within traditional banking systems.

In his remarks, Terrett hinted at the possibility of Brooks being tapped for various positions outside the SEC. This role, however, might suggest an era of significant change in the realm of cryptocurrency regulation.

It’s worth noting that the potential changes might not just affect the SEC. Terrett hints at the possibility of the Commodity Futures Trading Commission taking on a broader responsibility in overseeing cryptocurrencies under the Trump administration.

As a researcher, I’m exploring a shift in regulatory responsibilities that might entail dividing them between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). An intriguing option could be to grant the CFTC primary authority, allowing it to assume a more dominant role in this area.

Yet, as Terrett noted, this transition demands a significant upsurge in financial support for the CFTC, a body that presently struggles with resource constraints to oversee its existing wide-ranging duties. Consequently, for the time being, speculation persists.

Preparing for the change

As a researcher delving into the dynamic world of cryptocurrency, Gensler’s resignation has sparked intrigue, leading me to ponder what the future may hold. A blend of hurdles and possibilities seems to be the prevailing perspective among experts within our community, as they weigh in on this significant development.

In an interview with crypto.news, Slava Demchuk, the head of AMLBot, discussed a significant challenge: the absence of definitive regulations regarding cryptocurrencies in the United States, particularly when contrasted with the European Union’s Markets in Crypto-Assets Regulation (MiCA).

Because there are no clear guidelines, crypto firms find themselves in a state of uncertainty, struggling to comprehend their compliance obligations and failing to entice significant institutional investors.

One particularly thorny problem is crypto companies’ struggles to access banking services. Niko Demchuk, Head of Legal at AMLBot, described how banks in the U.S. are often hesitant to work with crypto firms due to the risk of regulatory fallout. 

Financial institutions tend to avoid relationships with companies suspected of non-compliance, as even indirect connections to cryptocurrencies could lead to increased oversight or penalties. This added scrutiny and potential fines can create obstacles within the industry, complicating everyday financial transactions for businesses.

Should the subsequent chair take a more favorable approach towards cryptocurrencies, it could lead to significant advancements such as clarified regulations, enhanced banking opportunities, and an atmosphere that fosters greater innovation.

There’s growing support for a regulatory system akin to the EU’s MiCA. Experts argue that this system would introduce uniformity in the American market, tackling matters such as cybersecurity, preventing money laundering, and detecting market manipulations.

In other words, during this transitionary phase, crypto businesses can leverage the chance to progress and prioritize the fortification of their compliance frameworks, improving customer identification procedures, and allocating resources towards advanced tools such as transaction surveillance.

It’s crucial for companies to stay ahead of the curve. Changes in regulations are on the horizon, and those who take steps to prepare themselves will find it easier to adapt when these changes occur,” Demchuk emphasized.

Crypto companies should take action immediately as the upcoming changes could significantly alter the landscape of the cryptocurrency sector not just in the United States, but worldwide.

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2024-11-24 01:06