Gary Gensler
In November 2022, Gensler was appointed to volunteer on Joe Biden's transition agency review team to support transition efforts related to the Federal Reserve, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, National Credit Union Administration, and securities and futures . Exchange commission. [22]
Treasury Department
Gensler served at the U.S. Treasury Department as Assistant Secretary for Financial Institutions from 1997 to 1999, then as Under Secretary of the Interior from 1999 to 2001. As Assistant Secretary of the Treasury, Gensler served as a senior advisor to the Secretary of the Treasury on development issues. and implementing the federal government's policies regarding debt management and sales of U.S. government securities. [16] In 1999 and 2000, under then-Treasury Secretary Lawrence Summers, Gensler fought to pass the Commodity Futures Modernization Act, which exempted over-the-counter derivatives from regulation. [23]
As Under Secretary of the Treasury for Domestic Finance, Gensler advised and assisted Treasury Secretaries Robert Rubin and Lawrence Summers on aspects of domestic finance, including the formulation of policy and legislation in the areas of financial institutions, government debt management, capital markets, government financial management services, federal lending, financial issues, government sponsored enterprises and community development. [16]
While serving at the Treasury Department, Gensler was awarded the agency's highest honor, the Alexander Hamilton Award, for his service. [12]
Sarbanes-Oxley
In 2001, Gensler joined the staff of U.S. Senator Paul Sarbanes, chairman of the Senate Banking Committee, as a senior adviser and helped write the Sarbanes-Oxley Act, which tightened accounting standards in the wake of the Enron and WorldCom scandals. [15]
CFTC
Then-President-elect Barack Obama nominated Gensler to serve as the 11th Chairman of the CFTC on December 18, 2008. [19] After some initial opposition to Gensler's nomination among progressive members of the Democratic caucus, [15] Gensler was confirmed by the United States Senate in a confirmation vote of 88–6. [24] Gensler was sworn in on May 26, 2009, promising to work to "urgently close gaps in our laws to provide much-needed transparency and regulation to the over-the-counter derivatives market to reduce risk, strengthen market integrity, and protect investors." [25]
Gensler has been called "one of the leading reformers since the financial crisis." [9]
Swaps
While at the CFTC, Gensler worked closely with the Obama administration, the U.S. Congress and other regulators to transform the $400 trillion in financial derivatives markets that were at the center of the 2008 financial crisis. [26] As chairman, Gensler began leading the Obama administration's efforts to "begin to control the Wild West of finance: the dark market in over-the-counter derivatives." [15] When the Treasury Department published a bill providing regulatory oversight of the swaps market, Gensler sent a letter to Congress arguing that the proposal did not go far enough. [27]
By the spring of 2010, there was momentum in Congress for Gensler's vision of derivatives oversight,[14] and Congress passed comprehensive reform as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010.
Following the passage of the Dodd-Frank Act, Gensler led the CFTC's efforts to write the rules needed to regulate the swap markets. [28] He led the agency as it wrote 68 new rules, orders and guidance, [29] and its coverage expanded from the $35 trillion futures market to the $400 trillion swaps market. [9] Under Gensler, the bipartisan commission unanimously approved more than 70% of the agency's rules. [9] By the time Gensler left the CFTC in January 2014, the agency had nearly completed the rule-writing process to implement the Dodd-Frank Act. [thirty]
Libor enforcement and investigation
Gensler led the reinvigoration of the agency's enforcement division, particularly in its prosecution of an enforcement case involving the manipulation of the Libor rate offered by the London Interbank Bank. [31]
Early in his tenure, Gensler listened to tape recordings of two Barclays employees as they discussed plans to report false interest rates in an attempt to manipulate the Libor rate. [31] Libor is the average interest rate, calculated by the leading banks in London, that on average the leading bank would charge if it borrowed from other banks. [32] It is used as a reference rate for many financial products, including adjustable rate mortgages, student loans, and auto payments. [7]
"The driving force behind the latest LIBOR prosecution," [7] Gensler worked with Enforcement Director David Meister and his team to lead the investigation and brought charges against five financial institutions for manipulating Libor and other benchmark interest rates. resulting in more than $1.7 billion in fines. [12] Barclays alone paid $450 million in fines as a result of the Libor investigation. [7] Gensler called Libor "unsustainable" and said it should be replaced as the benchmark. [33]
Frankel Fiduciary Prize
For his work to reform financial regulation, the Fiduciary Standards Institute awarded Gensler the 2014 Tamara Frankel Fiduciary Award. [34]
Maryland Consumer Financial Protection Commission
In 2022, Gensler was selected by the President of the Maryland Senate and Speaker of the House of Representatives to chair the Maryland Financial Consumer Protection Commission, which assessed the impact of potential changes in federal financial industry laws, regulations, budgets and policies on the state. [35] Under Gensler's leadership, the Commission recommended changes to state law to strengthen financial protection for consumers, including raising service standards, clarifying the state law setting standards for student loan servicers, and protecting buyers of manufactured homes in Maryland. In 2022, student loan legislation recommended by the Commission created a student loan commissioner, added the federal Military Loan Act and the Federal Servicemembers Civil Relief Act to state law, increased civil monetary penalties for violations, and codified some changes to debt collection laws. [36] In 2022, the state enacted additional Commission-recommended legislation to create a Student Borrower Bill of Rights to protect students from predatory practices. [37]
Gary Gensler stresses that crypto markets are open to manipulation and investors are vulnerable
US Securities and Exchange Commission Chairman Gary Gensler expressed concerns about cryptocurrency markets at an Investor Advisory Committee meeting last week.
The Investor Advisory Committee, established by Section 911 of the Dodd-Frank Act, advises the Securities and Exchange Commission on regulatory priorities, including “initiatives to protect investor interests and promote investor confidence and securities market integrity.” During his speech, Gensler shared some concerns about the crypto markets.
He began by acknowledging that “Satoshi Nakamoto’s Bitcoin White Paper and subsequent crypto markets were catalysts for change.” In August, Gensler said that "the innovation of the pseudonymous Bitcoin creator is real" and "she has been and can continue to be a catalyst for change in finance and money." Referring to the market capitalization of all cryptocurrencies, Gensler told the Investor Advisory Committee: “This is an asset class that falls within the public policy framework of supporting investors, protecting against illegal activity and protecting our financial stability.” He opined:
“Unfortunately, this asset class is rife with fraud and abuse in certain applications. In many cases, investors cannot obtain rigorous, balanced and complete information about tokens or trading and lending platforms.
“We simply don’t have enough investor protection in cryptocurrency right now,” described the SEC chairman. “The American public buys, sells, and lends cryptocurrency on trading, lending, and decentralized financial platforms, where significant gaps in investor protection exist.” He emphasized:
“This leaves markets open to manipulation. This makes investors vulnerable. If we don't address these issues, I worry a lot of people will get hurt."
Gensler went on to explain that many tokens are offered and traded as securities.” Commenting on whether the token is considered a security, he said: “There's actually a lot of clarity on that front. In the 1930s, Congress established a definition of security that included about 20 items, such as stocks and bonds.”
The SEC chairman continued, “One of the things is the investment contract,” noting that many tokens in the crypto markets “may be unregistered securities without required disclosure or market oversight.” The SEC chairman concluded his remarks by saying that crypto platform operators and token issuers should “come and talk to the SEC staff.”
He added:
“Financial innovation has only flourished briefly outside our public policy framework throughout history. If this area is to continue or achieve any of its potential to be a catalyst for change, we better include it within the public policy framework.”
Ripple (XRP) News
- Gary Gensler's speech paints a rather bleak future for the crypto space in the US, as he may continue to litigate.
- Not only XRP, but also Ethereum could be targeted by the SEC.
While Gary Gensler's opening speech as the new chairman of the US Securities and Exchange Commission (SEC) seemed like a positive signal for the cryptocurrency world, the US Senate Banking Committee hearing was a major disappointment. As lawyer Jeremy Hogan, popular in the XRP community , found out, there are many problems that can arise in the crypto space. Hogan said:
I never like to deal with negativity on this vlog, but the truth is that the risk warning issued last week, along with Gensler's message today, really disappointed me. I see a lot of clouds on the horizon for the cryptocurrency world.
For a long time during Gensler's hearing, there was no talk about blockchain or cryptocurrencies. However, after more than an hour, one senator asked what the US Congress and the SEC could do to create a “forward-looking regulatory framework.” Gensler responded with a platitude, asking how, under his leadership, the SEC would enforce investor protection from companies:
When I taught at MIT on these subjects, I thought these innovations were a catalyst for change. Bitcoin and other cryptocurrencies have brought new thinking to the payment system and access to financial services, but they have also raised new investor protection issues that we still need to address. If confirmed by the SEC, I will work with fellow commissioners to promote the new innovation, but also primarily to protect investors. If something was, for example, a security, it would be subject to the securities laws, it would be subject to the SEC. If exchanges trade them.
The Tennessee senator also asked the new SEC chairman about his “approach to digital assets.” Gensler said he would be “technology neutral” on cryptocurrencies. According to Hogan, this will mean that he will treat blockchains and DLT like any other company, placing them under the old norms. In particular, Gensler responded:
It is always important to update our market surveillance with new technologies, but I believe that most of them will be technology neutral. I say this because it is important for these new cryptocurrency technologies and possibly CBDCs to remain true to our principles of investor protection. […] So I think that in the SEC it is really to the extent that someone is offering an investment contract and a security, which is administered by the SEC and the exchanges that operate there. […] If not, then Bitcoin is considered a commodity.
The senator from Wyoming, a US state that is very progressive and where Ripple also recently registered a new company, responded to Gensler's point that the SEC has so far been a "black hole" for progress and whether that will change. Gensler also sidestepped this question of how the SEC could help blockchain companies, instead again citing investor protection.
Finally, Hogan noted that Gensler's responses are consistent with the SEC's recent "risk warning" for digital assets, which is not a good sign for the cryptocurrency world. The SEC may continue its reign of terror, initiating lawsuits and threatening litigation. Ultimately, Hogan said, even Ethereum could become a target of the SEC under Gensler's leadership. Hogan stated:
He's been saying this for years. But okay, I may or may not have wanted to hear it. According to Gensler, the SEC is going to scare companies into complying with the rules, and that will happen through litigation and the threat of litigation. […]
The Securities and Exchange Commission has created review powers over the last couple of years, expanding the definition of what a security is to include everything including Ethereum. Notice how he singled out Bitcoin as not related to the security, but did not mention Ethereum. […] And this is consistent with what happened late last week with the SEC's issuance of a risk warning.
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