In a stunning development that sent shockwaves through the crypto industry, Securities and Exchange Commission Chair Gary Gensler announced that he will fully resign from the agency on January 20th, 2024 – the very day that President-elect Donald Trump is set to be sworn into office. Gensler’s decision to not only step down as Chair but to leave the commission entirely puts to rest the major question of whether he would remain to defend his policies through the end of his term in 2026.
Since taking the helm of the SEC in April 2021, Gensler has overseen a slew of enforcement actions and regulations that directly impacted the nascent crypto industry. While many in the space initially hoped he would chart a light-touch approach, the regulator instead expanded on the playbook of his predecessor Jay Clayton, who served under the first Trump administration, to target crypto issuers for unregistered securities offerings.
But Gensler took things a step further, pursuing major crypto exchanges like Binance, Coinbase, and Kraken for allegedly operating as unregistered securities brokers and clearing agencies. The SEC’s lawsuit blitz sent a chill through the industry and forced platforms to reevaluate their US operations and offerings.
A Reluctant Embrace of Bitcoin ETFs
One area where Gensler did eventually budge was on the approval of spot Bitcoin and Ether ETFs, marking a breakthrough after a decade of attempts by crypto firms to bring such products to US markets. However, this only came after a court ruling against the agency compelled Gensler to side with the commission’s two Republicans to greenlight the long-awaited vehicles.
Now, with Gensler’s impending exit, attention turns to whom Trump will tap as his replacement atop the Wall Street regulator. Several names have been floated, including former SEC attorney and current private-practice lawyer Teresa Goody Guillén, and ex-Acting Comptroller of the Currency Brian Brooks, who also briefly headed Binance.US. Trump’s former SEC chief Clayton has been nominated by the president-elect to become the next US Attorney for the Southern District of New York.
An Even Split, For Now
In Gensler’s absence, the commission will be split between two members from each party – not enough to form a Republican majority bloc until Trump’s eventual nominee is confirmed by the Senate. This means major policy changes or enforcement decisions may have to wait until the GOP secures its 3-2 advantage on the regulatory body.
The staff and the Commission are deeply motivated by their mission of protecting investors, facilitating capital formation, and ensuring our markets work well for both investors and issuers. They are true public servants,
said Gensler in a statement on his tenure.
Gensler’s resignation announcement touted his record as building on the work of his predecessor Clayton, including in pursuing registration violations. According to the agency’s press release, crypto-related tips, complaints and referrals made up 18% of the SEC’s total in fiscal 2023, even as crypto markets represent less than 1% of the broader US financial system.
The outgoing chairman also pointed to court victories upholding the SEC’s authority to enforce securities laws on digital asset offerings “no matter their form.” However, just hours before Gensler’s resignation reveal, a federal judge on the Fifth Circuit ruled that the agency’s attempts to expand the definition of ‘dealer’ exceeded its authority in a lawsuit brought by crypto lobbyists.
An Uncertain Road Ahead
As the crypto community digests the news of Gensler’s exit, all eyes will be on how Trump’s SEC picks up the regulatory mantle. Will they continue the former chairman’s hardline approach, or chart a new, more industry-friendly course? For now, only one thing is certain: change is coming to the crypto regulatory landscape, and the impact will be felt from Wall Street to Silicon Valley and beyond.
The next several months will be critical in shaping the future of crypto regulation in the United States. As a new administration takes the reins, industry participants, investors, and watchdogs alike will be closely monitoring every move, statement, and enforcement action coming out of the SEC. The stakes couldn’t be higher, with billions of dollars of digital assets, the viability of emerging crypto businesses, and the US’s competitiveness in the global digital economy all hanging in the balance.
