Gary Gensler's Triumph
When assessing our victories, we should maybe try asking whether our opponents still accomplished what they set out to do in the first place
In the second half of 2023, those of us in crypto were fully justified in celebrating the Securities & Exchange Commission’s rapid-fire legal setbacks. These included full or otherwise substantial defeats regarding XRP-as-security (multiple times), Grayscale (twice), and (by proxy, it could be argued) Uniswap. Chairman Gary Gensler has proven beyond even the most charitable assessment that he possesses neither the depth nor the consistency to provide steady, reliable regulatory clarity, even if members of his own senior staff appear to have the right idea. His agenda has been so weak, and the execution so belligerently incompetent, that he even fails at winning a rigged match overseen by hometown referees.
But all of this was but a preview to the saga of the long-awaited U.S. approval for Bitcoin ETFs, a means for normies to get regulatory-approved exposure to Bitcoin.
I know that maybe only 15% of Pennyheads are even remotely interested in crypto and this is now the second edition in a row where I’ve nattered on about Bitcoin ETFs. But I also know that 100% of you love a good story, especially one that involves the antagonists kicking the ball into their own net in slow-motion over several years.
We can be confident that Gensler could still exit his office tomorrow, by choice or otherwise, knowing that he accomplished everything he could have reasonably set out to do or, at minimum, what his superiors set out for him.
So, in terms of some brief table-setting:
Jan. 8 — Crypto-Twitter (often just “CT”) was treated to some concern-trolling from Gensler, appearing to caution-and-condition the market regarding fraud in crypto. (“Investments in crypto assets also can be exceptionally risky & are often volatile…”) Many of us saw this as an indication that the long-awaited approval of a Bitcoin ETF was imminent; he was just preparing the ground and checking off the box.
Jan. 9 — Hackers managed to take over the SEC’s poorly secured Twitter account. (This is confirmed by Twitter’s safety team.) The obviously off-brand message announces “approval for #bitcoin ETFs for listing on all registered national securities exchanges.” It nevertheless caused a bitcoin price spike and a crash, resulting in $90 million worth of liquidations. Both Gensler and the SEC disavowed this communication, which is especially rich since the SEC tut-tutted everyone last October that “The best source of information about the SEC is the SEC.” Around that same time, Gensler himself even underscored the importance of “strong passphrases or passwords” and “multifactor authentication.”
Jan. 10 — Bitcoin ETFs were finally approved, though the announcement was quickly pulled down and the “Page Not Found” copy quickly changed, further adding to the perception of rudderless leadership and administrative incompetence. In his formal, presumably genuine, announcement of the approval, Gensler could not resist one final, petty, context-unburdened, low-effort dig: “Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing.” By the end of the week, Bitcoin ETFs would set records for first-day deposits.
But, for all of these missteps both recent and historical, and despite the fact that he represents the Peter Principle delivered at railgun velocity, Gensler can still pat himself on the back — we know he knows how to do this — for a job-well-done.
Yes. You read that correctly. We can be confident that Gensler could still exit his office tomorrow, by choice or otherwise, knowing that he accomplished everything he could have reasonably set out to do or, at minimum, what his superiors set out for him.
“We have no evidence,” the ever-logical Spock admonished his sleuthy colleagues in Star Trek VI: The Undiscovered Country. “Only a theory which happens to fit the facts.”
But let’s explore this anyway.
Useful Speedbumps
I was still an undergrad at Our Lady of the Perpetually Rising Tuition when the Internet started to become The Next Big Thing. If you were friends with the two-person astronomy department and asked nicely, you could get an account on the abused workstation that connected our tiny liberal arts college to the rest of the world through a soda-straw of an ISDN line. The 14.4k modem back in your room would fight the rest of the campus nerds for the four or five available dial-in ports. The joke was that “IDSN” might as well have stood for “It Still Does Nothing.”
As demand for Internet access grew, so did the haphazard attempts to administrate it. So, when it came to publicly wrestling with The Big Issue of Internet access on campus — via meetings, symposia, op/eds in the school paper, and even an electronic sit-in led by this author — the college tended to tolerate experts but actively seek out the merely cooperative. Members of the campus community who focused on the promise of the increased access to knowledge tended to be brushed aside in favor of those who indulged the administration’s infantilizing concerns about the potential for abuse. (The ability to locate and download The Anarchist’s Cookbook was, for a time, the perceived “match point” for the restrictionist point-of-view in any debate. Also, pr0n.)
This group got the attention of campus administrators not so much because of their command of the issues but because they were useful in slowing things down, standing athwart the future yelling “Stop!”
I have to assume that his job, whether he knew it or not, was the opposite — FUDmaster-in-chief.
I tell this story to answer the question “So, why Gensler?” Everything I see supports the notion that he was elevated to his position not because of steely-eyed insight or prescience, but for the fact that he was precisely the kind of creature that could throw just enough uncertainty into a yet-nascent, disruptive space. He was the target decoy that the likes of Sen. Elizabeth Warren and their self-styled “Anti-Crypto Armies” needed, even as the government-managed machinery that crypto was originally meant to fix was going haywire.
Put another way, Gensler was never meant to bring clarity to the digital asset ecosystem. (Look no further than his chaotic tenure at the Commodities Futures Trading Commission.) The most he’s been able to muster are dishonest, spider-meets-fly encouragements to “just come in and register.” I have to assume that his job, whether he knew it or not, was the opposite — FUDmaster-in-chief. This, he has accomplished.
SEC: Seeking Exaggerated Celebrity
Further supporting Gensler’s evident mission to sow uncertainty and hobble the American cryptocurrency ecosystem: His desire to do so by becoming a new kind of “celebrity regulator.” (That is, “a regulator who is a celebrity,” rather than “someone who regulates celebrities,” but even this distinction was blurry.)
Gensler has often claimed that crypto is only a small part of his agency’s taskload. However, given the vastness of his agency’s power and his desire to expand it, that’s a lot like saying that “only” five-percent of the American population believe in Bigfoot — that’s still more than 16.5 million people or twice the population of Virginia. We’re still talking nation-states worth of market value.
Small or not, crypto has been very beneficial in terms of amplifying Gensler’s public profile, transforming him and his agency into a “name-brand crusader” even as they missed exascale-sized frauds in the form of FTX, Terra, Voyager, Celsius, and others under his watch.
Gensler probably thought that appearing to tame The Great Crypto Menace while attempting to use their tools and ape their tone — while leveraging privileged access to the media — would have beaten a distinguished path toward the Treasury Secretary job he has reportedly long-coveted. A new kind of regulator. Just one of us nerds on Twitter and YouTube, but on the other side.
Witness this regulator — someone with the power to take away one’s property and freedom — trying to be cute on Twitter:
Here, he helpfully informs us that “stake” and “steak” are homophonous, which is probably the most effort he has ever applied towards providing clarity in crypto.
And, let us not forget, he explicitly courted celebrity status by going after Kim Kardashian and spinning that into a self-promotional media tour. Now, while anyone who knows me is familiar with my stance on crypto influencers, one wonders about Gensler’s sense of priorities and enforcement discretion when when, again, far bigger crimes escaped his watchful gaze.
He chased fame. He got it. Achievement unlocked.
Inception-level Self-Parody
While I still have my reservations, the approval of Bitcoin ETFs is nevertheless a great victory for our ecosystem and finance at-large. Crypto has emerged victorious, at least for the moment, despite the best efforts of opponents who enjoy unlimited resources and the tools of legalized coercion at their disposal. There is a lot to be proud of.
As for Gensler? He finds himself increasingly isolated, having exhausted his usefulness to his former allies before bungling the Bitcoin ETF approval. Even Sen. Warren has gone from stage-managing Gensler’s testimony prior to Senate hearings to cynically turning on him.
“The SEC needs to do its job,” the performatively pulpit-pounding Senator recently scolded.
And the job? Climate change regulations, implausibly. Like the slimy beltway operator Wesley Mouch in Ayn Rand’s Atlas Shrugged, Gensler has also asked for “wider powers” in about as many words. Unsure if climate impact reporting is what he meant.
But while Gensler has become a parody of Rand’s Mouch — which was, itself, a parody — he has nevertheless served well in the role he was cast, such as that role is, by the people who put him there.
Congratulations, Gary.
(This edition, or any other, does not reflect the official viewpoint of my employer, Bloq, or any of its partners or spinoffs. Also, I still refuse to refer to Twitter as “X” for so long as the original domain works.)
Recommendations
“Is Information Fundamental?” NOVA (2014) — The case is made: What if the fundamental units of our universe aren't atoms, protons, quarks, and the like but, rather, information? Behold this brain-bomb: “‘If you tried to pack information more densely than [10^69 bits per square meter] .. your hard drive would collapse into a black hole.’”
“The Secret Joys of Geriatric Rock,” The Atlantic (2023) — Okay… My teenager does enthusiastic renditions of Ronnie James Dio songs and there is plenty of runway for the young to take our music further than where we left it. “This is the kind of music that made Soviet commissars think the West was doomed to fall. But it’s also the kind of music that seems pretty strange when performed by men of a certain age.” Maybe so. Keeps me young.
“Baseball And The Algorithm,” (2023) — I remarked to my wife just last night that I don’t follow sports, but I have been lately devouring meta-content about sports, such as The Last Dance and the David Beckham documentary series. So questions like this are, at least for me, cerebral catnip: “The MLB YouTube channel has posted 291,289 videos. If you had to guess what happens in the video with the very most views, what would you say?” Without giving too much away, consider that “The most popular YouTube video produced by a century of televised baseball is a clip that became huge only by an accident caused by a glitch in an algorithm that simply will not stop pushing until you give in to its mistake.” If it takes much more than that to entice you, I’m afraid I can’t help.