The SEC and Gary Gensler’s Failure: Protecting Wall Street Giants like BlackRock instead of US Customers

It’s been an eventful month of June for crypto investors and the broader crypto industry. It all started with the U.S. Securities and Exchange Commission (SEC) suing two of the world’s largest crypto trading platforms – Coinbase and Binance – over the violation of securities laws.

Soon after, several big players like Crypto.com decided to wind down operations in the US following the heavy-handed regulatory action. However, exchanges like Coinbase and Binance have lashed out at the SEC for the lack of regulatory clarity for cryptocurrencies.

During a recent congressional hearing on cryptocurrencies, Robinhood revealed that it faced significant challenges in obtaining assistance from the SEC to register as a digital assets broker.

Dr. Paolo Tasca, a professor and economist at University College London, told CoinDesk that there’s far more to explore in the full accounting of SEC’s recent activities.

Major brokers like Robinhood and eToro have started delisting tokens from prominent blockchain projects, particularly those using proof-of-stake (PoS) algorithms. This move comes as SEC Chair Gary Gensler raises concerns about PoS and increases scrutiny on the cryptocurrency industry. While there are issues in the crypto space, such as cryptocurrency scams, the losses from these scams are much lower compared to overall security fraud losses, not just crypto.

Dr. Paolo Tasca adds that Gensler’s focus shows that he is following the nine-over-one rule i.e. spending 90% of his time on crypto, a sector that contributes to only 10% of the scams.

Is SEC’s Gary Gensler Protecting Wall Street Players?

A week after the SEC sued crypto exchanges Binance and Coinbase for violating US securities laws, the world’s largest asset manager BlackRock filed for a spot Bitcoin ETF with Coinbase as its crypto custodian. In the past, the SEC has rejected dozens of applications for spot Bitcoin ETF stating that there are not enough consumer protection measures.

But with giants like BlackRock joining the bandwagon, many experts believe that the SEC is likely to give it a green signal. However, there’s no official word on this by the SEC yet.

This has led many to believe that SEC chairman Gary Gensler could be favoring big players like BlackRock. Dr Paolo Tasca writes:

As speculation continues to rise, conspiracy theories about the SEC’s true motives have also emerged on Twitter, Reddit and beyond. There are questions about Gensler’s relationship with Sam Bankman-Fried. And reports that he was turned down for advisory roles at Binance. He doesn’t have to be collaborating with SBF or operating out of spite to question the soundness of Gensler’s thinking.

Former SEC Chair Jay Clayton Slams Gary Gensler

Former SEC Chairman Jay Clayton has questioned the current leadership calling out Gary Genlser on his comments that “if we’re not losing cases, we aren’t suing enough businesses”. Clayton said that this is a fundamental shift in the way Americans view the role of the government.

Clayton added that regulatory bodies shouldn’t engage in cases, just for the sake of it, where they think they are going to lose. Ripple attorney John Deaton quickly explained this stating that the judge in the Ripple case criticized the lawyers from the SEC (Securities and Exchange Commission) for not following the law properly. In a case, it is important for the lawyers to have a genuine belief that they can win based on the law. They shouldn’t wait for the judge to tell them that they are not following the law correctly. The judge’s comment suggests that the SEC lawyers may not have been acting in good faith in the case.