Author: Weilin, PANews
Only 6 days remain until Donald Trump is inaugurated as 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. Previously, Gensler announced he would resign from the SEC on January 20.
Based on these two interviews, PANews has compiled 11 important questions about cryptocurrency and capital markets, along with how Gensler responded to them.
1. On January 14, the Securities and Exchange Commission (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 that people comply with the law. We have significant responsibilities and will fulfill those responsibilities, regardless of who is in leadership. There will be different leadership transitions this week and next week, but we will continue to ensure that capital markets serve investors and that market participants comply with the law.
This is our job. Essentially, if we do not adhere to facts and laws, how can we build trust in capital markets? In reality, honest actors in the market will benefit because more investors will be willing to enter the market and participate.
2. What do you think the next government means for the SEC? Are you worried that what you have done during your term will be overturned by the next administration?
The achievements we have made during this administration are very significant. I took office after the GameStop incident, at a time when there was a peak in special purpose acquisition companies (SPACs), and we implemented the most important reforms in the stock market. I would say that we completed this reform in a consistent 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 cycles; we shortened the settlement cycle to one day.
I also cannot imagine anyone wanting to retract the first federal privacy notice to the public, stating that if your information is leaked by an investment advisor or broker, you will receive notification. I dare say I do not think anyone would want to retract these measures. They will not make it easier for insiders to exploit significant non-public information for trading. 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 think these are all good policies that reduce costs and promote integrity in the capital markets.
3. Some people believe that supporters of cryptocurrencies 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 enforces those laws. Think about it: we have rules on the highway, traffic lights, and police officers. If you are driving a hybrid car on the highway, does it not need to obey traffic laws? Or does an electric vehicle on the highway not need to follow the rules? We apply the law consistently in financial markets, and the cryptocurrency space is non-compliant.
I also want to say that voters are smart enough to know that they vote based on other issues, such as inflation or other economic concerns. I don't see any evidence that cryptocurrency is a major factor influencing voters' decisions.
4. You have achieved a lot during your tenure, discussing things like shortening settlement cycles and reforms to money market funds and the treasury market. However, you lost 4 out of 5 challenges to your rules, which exceeds the total of the previous three chairs. Is there anything you wish you could have done differently?
For anyone working in government, this is an interesting time, as there are significant changes occurring in the courts. The great hockey player Wayne Gretzky once said something along the lines of you should skate to where the puck is going, not where it has been. In this context, the courts are like the puck; where are they heading? They are reinterpreting laws, whether it be environmental law, communication law, health law, or securities law.
We have been acting according to the law, working under 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 already being implemented. So people can now benefit from these rules, such as knowing whether company executives received compensation based on incorrect financial reports and whether that information needs to be recouped. As you said, we have made reforms in the money market area, 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, to some extent, forced you to approve spot Bitcoin and Ethereum ETFs, opening up cryptocurrency investment to the public. Do you wish for a different outcome? Do investors face greater risks as a result?
Bitcoin itself is not a security. Neither I nor my predecessor 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 public you mentioned, had the opportunity to invest long before ETF products came along. The ETF for Bitcoin that was approved during my tenure was a spot ETF and was launched later. Investors in spot trading products are better protected, with lower fees, stricter regulations, oversight in the stock market, and these products are registered and compliant with SEC requirements. My predecessors had rejected these products, while we followed the leadership approach of J. J. Clayton. Bitcoin and Ethereum account for 70% to 80% of the cryptocurrency market. What I am truly concerned about are the other parts, those thousands of tokens, and the conditions under which they continue to exist, which is essentially that investors are investing or betting on a project, and they need to be given proper disclosures. The law states that you should receive such disclosures, but currently, these tokens are non-compliant. I do not prejudge any project.
6. You seem to intend to separate Bitcoin from the rest of the industry. Have you begun to develop a new perspective on Bitcoin? Do you think Bitcoin has intrinsic value and is a store of value? Or do you think that in 10, 15, or 20 years when looking back, it will become like the tulip bubble of the 18th century? You taught at MIT, so you should have some opinions; you must have read the book (The Bitcoin Standard), right?
It's hard to predict. I know how you view these other cryptocurrencies, and I know you have a negative view. But regarding Bitcoin, the SEC has never said it is a security.
Yes, (I've read it), I think Bitcoin is a highly speculative and volatile asset. But with 7 billion people in the world, everyone wants to trade it. Just like we have had gold for 10,000 years, we now have Bitcoin, and perhaps there will be other similar things in the future. Those thousands of other projects need to demonstrate their use cases and prove they have real fundamentals; otherwise, they will not be sustainable.
7. Don't you like those other cryptocurrencies?
I have never owned these cryptocurrencies, and I have maintained this stance for 7 or 8 years.
8. What are your thoughts on the concept of prediction markets, especially the decision by Kalshi to hire Trump's son as an advisor?
I have no opinion on who others hire. However, the capital market itself is vast, with a $120 trillion capital market, whether it be stocks, bonds, or ultimately prediction markets, it is all about forecasting future cash flows or predicting future opportunities for companies. 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 done. We implemented better disclosure of information, ensuring that only information meaningful to investors is disclosed, 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 do you think?
We have laws. Congress has passed these laws, and of course, they can be changed. But part of the cryptocurrency space involves the public investing in these projects, many of which are subject to securities law. In this area, many companies are not compliant. Most of what you discuss daily revolves around stocks, bonds, or a combination of fundamentals, valuations, fundamentals, and sentiment. However, the cryptocurrency space seems to rely more on sentiment, with much less 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 manifested. Certain policies will become clearer over time, but uncertainty around policies certainly exists. Over the past four years, I have also mentioned that there are areas in the capital markets with many leverages, many loans, and low margins. These issues typically arise in the so-called repurchase 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 risks in the future.
11. If you could do it again, what different decisions would you make?
I hope we can complete these reforms in the treasury and stock markets soon, and that issues related to the courts can also be handled more smoothly. It is noteworthy that the courts' attitudes are undergoing significant changes. I really wish I could better predict these changes so we can do things that can better address court challenges.