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April 21, 2023

The Dis-Appointment of Gary Gensler

To say that Gary Gensler has been a disappointment is an understatement.

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To say that Gary Gensler has been a disappointment is an understatement. Cathy Wood, Silvio Micali, and many of us in the Bitcoin and Blockchain ecosystem had high hopes because he understands the technology and its potential. With a Spot Bitcoin ETF still unrealized and the SEC suing anyone involved in Crypto, his “progress” is almost laughable. The collapse of FTX, Celcuis, Block-Fi, and Terra Luna all happened under his watch while his attention was on Celebrities like Kim Kardashian and low-hanging fruit. Part of me thinks it’s part of the plan to fleece and ruin retail investors to allow Long-standing Institutions to gain a foothold during a grey area of regulation through enforcement. Now, some lawmakers like Congressman Warren Davidson are calling for his removal and asking him directly about XRP and Ethereum. GOP Majority Whip Tom Emmer is also taking him to the woodshed. Where does this leave Goldman Gary, and why is he dragging his feet on absolute clarity for Digital Assets?

This is not investment advice or an endorsement of the securities or property mentioned.

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I'm Scott McGregor @scottrades on Twitter. Welcome to the Hot Wallet Podcast. before I get going. Just a quick ask… for you to press follow on whatever platform you're getting this on, and if you like what you're hearing, please leave a five-star review that would really help me out.

Now before I go on what some might call a rant about a public figure, I do want to make it known that I personally believe it's important to respect both elected and appointed public officials and public servants. It's my belief that anyone who gets themselves into a position of service do so because they personally believe that they have the ability to make a difference and help people. Whether or not you have to agree with said person in authority is a completely different manner, but I do believe we should have a level of respect for anyone serving the public. 

I remember the first time I heard the name, Gary Gensler. I'm pretty sure it was Kathy Wood who said it during an interview, as there was some rumors about him being appointed to the head of the SEC. Kathy spoke very highly of Gary not only as an intelligent person but someone who had taught a course about Bitcoin and blockchain at MIT and, therefore fully understood the technology the potential and why it's important. 


At the salt conference in 2021, Cathy would also say and I quote. I'm really happy that Gary understands crypto and understands the merits of Bitcoin in particular. He is a regulator, though and he is a hardcore regulator. 

That comment came shortly after the Securities and Exchange Commission. Told crypto exchanges, including Coinbase to come in and talk. 

Another cheerleader for Gary Gensler is the founder of Algorand Sylvio Micali. They both taught at MIT. And when Sylvio was asked what he thought Gary could bring to the role of the head of the SEC, hears what he said a few years ago.

Now these are just a few examples, but the point is that people in the know whether you're a long-term investor or a builder with boots on the ground… Gary Gensler's appointment to the head of the SEC came with positive anticipation. He knows about the asset class He's a good communicator who speaks clearly and plainly. He's our man in Amsterdam. Taking Mia Wallace out for dinner and 5-dollar milkshakes at Jackrabbit Slims and when he comes back he going to have a spot Bitcoin ETF ready to present to Marcellus Wallace. 

But it wasn't to be. Gary ended up being the gimp. With clown memes flooding every tweet, he puts out and the moniker of Goldman Gary being thrown his way when it was so obvious that instead of focusing on digital innovation and saving retail investors from actual crises. He was more concerned with maintaining the status quo and suing easy targets and bragging about the number of enforcements brought forward towards any company in the digital ecosystem. 


He had such an opportunity to become a legitimate hero for digital financial innovation. Instead, we were fools for believing he was one of us. When in fact, he never owned Bitcoin or any digital asset in his life. I can't imagine someone agreeing to teach a course on blockchain technology without ever buying it themselves. I remember when I interviewed. Greg Foss in 2022, I asked him about how people should get started when it comes to Bitcoin, digital assets etc. And one thing that he said to me was the it's important to do it yourself to buy the asset, hold the asset, send it to someone, have them send you some and really play around with the technology so you were able to See first hand the power of Blockchain you have and the beauty of Bitcoin. 


In a recent congressional hearing Gary Gensler's first in a while it was clear that from one side of the political spectrum Gary's actions or should I say in-action, is getting the attention of lawmakers. What seemed like a 5-hour firing squad elected official after elected official attacked Gary for his clear missteps in handling the digital asset ecosystem in America. One going as far as to introduce legislation to have Gary Gensler removed as head of the SEC.


That's Congressman Warren Davidson. 

Now the most popular clip from this recent congressional session is one where chair Gensler was asked directly about Ethereum and whether or not he believed Ethereum was a security.

Chair Gensler is unable to answer the question. My thought is because there are so many court cases that the SEC has right now against things like Ripple and Coinbase that, any comments he makes could have an effect on the outcome of those cases and essentially have them blow up in his face. That would surely lead to his forthcoming resignation… I have to believe that's something he doesn't want as I've heard he in fact wants higher-level government positions in the future. But how do you get higher-level government positions? Easy. Don't shake the boat, and stay loyal to those who have the power to elect you. 

So my thought here is that Gary just doesn't want to be anyone who makes any real decisions that may affect any traditional finance players. He wants to have Wall Street behind him no matter what. And we all know how dangerous Bitcoin is to Wall Street and the status quo. The fact that Canada has many Bitcoin ETFs and America has none as I mentioned in a recent podcast, shows you the lobbying power of major traditional old players in the market where they want to keep everything under their control. Now I've said before, it's important to have institutional support in web3, blockchain, Bitcoin, etc. We need them. They are the conduit for that wall of money to come into this market. The problem is they want it on their terms. They want it under their control. They want to be the ones moving the market. And in my opinion, a lot of these traditional institutions are not yet set up for that to happen. Maybe they weren't paying attention because they were too busy packaging mortgage back securities and credit default swaps and stuffing them down the throats of retirement funds and other investors 

And then the pandemic happened… and everything changed. 

I think Gary Gensler is a victim of the system. Not that that takes away any of his guilt from slowing America's digital innovation to a crawl. But he's in a position where some of the heads of the major banks can't even admit that Bitcoin has value and so he probably has an uphill battle no matter what. If he goes forward with regulatory clarity and fair and reasoned rules… he angers the institutions… If he continues to drag his heels, he's going to anger the constituents of elected officials. And so what is the least evil? In my opinion, the least evil would be angering the constituents of elected officials because in his mind they are not going to be the ones to help him elevate his career forward the people that are going to be able to influence and elevate his career or the traditional players. They have the money. They help make the rules they decide who the gatekeepers are. 

That's why he's going after the low-hanging fruit. That's why instead of trying to shut down unregistered securities like Ethereum Max, Gary Gensler went after Kim Kardashian. It's easier. It makes headlines. His name is in the news under the enforcer. Anyone who is looking on a peripheral level sees that "Gary's really busy. Look at him catching all these people breaking the law. He is our man.."

Meanwhile, as Gary Gensler is keeping us safe from Kim Kardashian, people like Sam Bankman-Freed, Do Kwon, and the likes of FTX, Terra Luna ravage retail investors blowing some up and taking them out of the game without any protection from the government. And if you ask me, that's all by design to so doubt fear and uncertainty around crypto and digital assets while major institutions prepare for their own entry when they are ready. 

We're already seeing major players like the Nasdaq say they want to play a part As a trusted custodian for digital assets. And wouldn't you know the reiteration of that news came very shortly after the SEC tried to crack down on Binance. 


In my opinion, Gary is simply biding his time awaiting his next promotion, but the only way he's going to get that is if he plays by their rules and watches retail investors struggle to survive. 


It's not all bad, however, we are seeing some dissension in the ranks within the SEC. Commissioner Hester Pierce has been a bright light during a dark time. Releasing various statements and speeches showing that not everyone within the SEC agrees with Chair Gensler's approach to digital assets. I recommend you take some time and read some of her notes if you're interested. They are carefully written and well thought out. 


It's important to have resolve during this time where we see publicly traded exchanges like Coinbase threaten to leave American shores. Bitcoin isn't going anywhere… in fact, it's only getting stronger. The more people hear about it, read about it and talk about it. The more influence it has and the more special it becomes. There's still a large portion of the population of this planet who don't get it yet. Well, some see that as a problem I see it as a fantastic opportunity to share knowledge and help grow the understanding of others not just about Bitcoin but about financial literacy and monetary policy. For too long, too many of us, including myself or simply a passenger along for the ride that elected and appointed officials were taking us on with no real understanding of the long-term effects and impacts it would have on myself and my future family. Now as a father, I make it a priority for my kids to understand the truth about what's happening and what it could mean down the road. That doesn't mean I try and influence them just that I try and help them understand so that they can decide for themselves what they think.  


Meanwhile, as we are stuck with this current regime of digital asset intolerance, seeing countries like Russia and jurisdictions like Hong Kong embrace Bitcoin, crypto and digital assets and the potential of America to fall behind the rest of the world … I have one final thing to say and that' Gary, We're not only mad. We're disappointed. 


Thanks for listening to the Hot Wallet Podcast. If you like this, be sure and check out our back catalog, including fantastic interviews with traders, analysts, and authors. My name is Scott McGregor @scottrades on Twitter. I'll see you next time.