Cryptocurrency for Beginners: with Crypto Casey

SEC & Congress on Cryptocurrency! (Crackdown?) - Gensler vs US Senate

September 16, 2021 Crypto Casey Season 2021 Episode 37
Cryptocurrency for Beginners: with Crypto Casey
SEC & Congress on Cryptocurrency! (Crackdown?) - Gensler vs US Senate
Show Notes Transcript Chapter Markers

This is a breakdown of US SEC Chair Gary Gensler's testimony before the US Senate, focusing on the need for regulatory clarity in the cryptocurrency markets. The SEC & Congress discuss whether cryptocurrencies are securities and what retail investor protections should be implemented.


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Five months ago Tuesday, the US Senate confirmed Gary Gensler as chair of the Securities and Exchange commission, historically one of the most important jobs in the Federal government. Also Tuesday, Gensler testified before the Senate for the first time in this particular role and of course, crypto was the hottest topic.

Before diving in, let’s take a moment to revel in a series of comedic clips to get us in a happier, more relaxed state.

0.0 - ding

Yes, that’s right. We are dealing with a group of boomers who can’t even silence their cell phones during a live testimony before lawmakers, who are attempting to regulate cryptocurrency. No offense to boomers, I love all of y’all, but I think we all can admit to the hilarity of the irony.

Amazing. So, without further ado, let’s go through some of the highlights together in the order they transpired. Republican Senator Pat Toomy made some opening remarks worth exploring together.

1.0 - toomy

So far, I’m sure most of us agree that the SEC trying to restrict retail investing activity under the guise of protection is simply not the solution to whatever problems actually exist and ones that they purport exist, 

but are not actually substantial enough to warrant blanket restrictions. And without getting too much in payment for order flow, basically instead of charging investors trading fees per transaction, 

because we all no there is no such thing as free lunch, behind the scenes, there is a kickback system, so at the end of the day, a fee of sorts is baked into the price we pay for the stock.

So, yeah, not ideal, however I believe most retail investors in the market got into the market and are staying in the market that otherwise would’ve never gotten in or would’ve never stayed in, 

are here because psychologically, no trading fees and the inability to see what’s baked into the price, looks favorable and nice, so to speak.

Moving on… 1.1 - toomy

Okay, this guy acting appalled at the notion of markets being rigged against retail investors is absolutely delusional considering the GameStop fiasco where exchanges halted retail trading activity 

and basically allowed institutional investors to reposition their shorts, and a myriad of other things we all know and don’t really have any power to combat at this time.

So yeah, vast disagreement of Toomey’s view in that regard, but do agree that adult retail investors should be allowed to invest as they see fit without needless restrictions. Moving on…

1.2 - toomy

Amen, fam. Where is the clarity, why the secrecy, why are they choosing to regulate by enforcement, and in some instances, clawing back at projects like Ripple or XRP that have been operating for several years without issue?

So Toomey recognizes how promising blockchain technology and cryptocurrency is and I agree that the SEC is acting and may continue to act in ways that will greatly stifle innovation in the United States.

Okay, next Gensler takes the floor to make some opening remarks. So let’s jump to his first mention of crypto, which I found quite interesting:

2.0 - gensler open

Hmm… I don’t know about you guys, but I was surprised that he decided to be like, BEFORE we talk about crypto, let’s talk about something way more pressing - AI. Artificial Intelligence. 

Wow, I mean our government can hardly wrap its mind around internet technology, let alone bitcoin, and Gensler proposes to make AI front and center? 

Yeah super weird, but what’s funny is none of the senators latched on to the AI thing, and, honestly it seemed like he threw that in there to take the heat he was going to get off of his horrible performance in the crypto space thus far.

Let’s move on…

2.1 - gensler open

So Gensler kept his opening remarks about crypto focused on the need for more investor protection. Surprise surprise. 

Okay, so after opening remarks, the floor was open for senators to pose questions and concerns to Gensler, starting with Republican US Senator Pat Toomey. 

This is about a 4 minute clip, but they keep the moment rolling, so hang there with me as it’s a pretty easy dialogue we can all follow. Check it out...

3.0 - toomy q

So basically, Toomey wants clarity on whether or not stablecoins are securities and thinks that the definition of a security is broad, but well-defined. He believes stablecoins aren’t securities because there is no expectation of profit from them.

While Gensler believes that stablecoins could potentially be securities under the broad and quite dated parameters, and basically tries to throw the ball in the senate’s court, saying that he thinks congress needs to define better parameters that the SEC can work within.

Cool. Staying on track by presenting everything in the order it transpired, I just want to throw in this one clip of Republican Senator John Kennedy because it literally made me LOL.

4.0 - kennedy

Haha, oh my god. That just cracked me up. Kennedy launched into how he thinks Gensler is pushing personal and political agendas with his focus on corporations’ disclosures about their impact on climate change and their treatment of workers and employees, which we aren’t getting into in this video.

Next up we have super crypto advocate Republican Senator Cynthia Lummis. Without playing too much of the clip, basically Lummis wants to know why the SEC isn’t treating crypto innovation the same way they treat traditional corporations’ innovative developments.

Particularly she begs the question why the SEC can’t just apply what’s known as “no-action relief” to crypto innovators, which basically offers some protections and gives assurances to innovators that fringe into regulatory gray areas. Check it out:

5.0 - lummis

Hmm… curious, because if we look at a tweet from Coinbase CEO Brian Armstrong that was posted just last week:

5.1 - it reads: In May of this year I traveled to DC to meet with every regulator and branch of government I could.

The SEC was the only regulator that refused to meet with me, saying "we're not meeting with any crypto companies". This was right after we became the first crypto company to go public in the U.S.

Yeah, “come in and talk to us,” - what a joke. Oh, and let’s juxtapose his comment about “seeing if innovators and the SEC can cobble together something” and work things out. 

The same tweet from Coinbase CEO further up discusses the SEC’s response to their new lend feature:

5.2 -  They responded by telling us this lend feature is a security. Ok - seems strange, how can lending be a security? So we ask the SEC to help us understand and share their view. We always make an effort to work proactively with regulators, and keep an open mind.

They refuse to tell us why they think it's a security, and instead subpoena a bunch of records from us (we comply), demand testimony from our employees (we comply), and then tell us they will be suing us if we proceed to launch, with zero explanation as to why.

Yeah, and this happened literally within the last week, which is in complete, direct opposition of what Gensler just said this past Tuesday.

Lame, super lame. Let’s watch another 2 minute highlight from Lummis:

5.3 - lummis

Well, first of all I think it’s a bit rich to say we want to make sure businesses aren’t using and abusing our assets, when in fact, all of the cold hard cash we store in banks for a fee is used and abused to generate profits for banks when they lend it out.

How could it be construed as abused? Because since March of 2020, US banks haven’t had to hold any reserves to back these loans. Which means all of our cash assets in banks are pretty much being gambled.

And then it’s also rich how he says the US has become the largest capital market only because it’s regulated and creates an anti-front-running, anti-fraud, anti-manipulation environment, when nothing could be farther from the truth. Wall Street absolutely commits all of those things all the time.

But, it’s no surprise Gensler would rather set his sights on crypto than Wall Street, because Gensler comes from Wall Street. He made a ton of money on Wall Street, which begs the question, is Gensler, in fact, Wall Street’s daddy?

Let’s check out the final clip with Lummis:

5.4 - lummis 

Notice how he flipped the script, saying verbatim: we have a GREAT deal of clarity on what’s a security, but we just need more bureaucratic BS to come together and sort everything out. Awesome.

Okay, next up, I have a highlight from Republican US Senator Mark Warner where he voices his thoughts and concerns about crypto. He ultimately doesn’t ask Gensler for comments on that topic, so let’s just listen to this one minute clip to gain more insight on the feelings different members of congress have about crypto.

6.0 - warner

Nice. So overall, he’s requesting what we all are, which is regulatory clarity so we can take some of the “wilds” out of the wild wild west.

Next up, we have Republican US Senator Thom Tillis. In this clip, Tillis brings up a good point about Gensler’s attack on the gamification built into user-friendly investment applications like Robinhood, Coinbase, and similar. Check it out:

7.0 - tillis

Yeah, it’s pretty messed up if you’re going to allow gamification in the lottery system where all the money lost pretty much goes to the government under the ruse that it’s for education, yet money that isn’t going to the government as a result from gamification is a different story.

And remember all of this has to do with restricting retail investment activity, meanwhile the lottery, legalized gambling is allowed to exist, that cons people into basically giving their money freely to the government? Yeah ridiculous.

Next up, we’ve got crypto skeptic democrat US senator Elizabeth Warren, putting on nothing-short of a scripted dialogue between her and her buddy, Gary Gensler. This clip is about 4 minutes, but it’s totally worth the watch.

8.0 - warren

Yes, Warren is not exactly favored by many in the crypto community. She wasn’t wrong about some of the points she made, but the amount of regulation she desires would absolutely stifle innovation in the US, putting us way behind.

And Republican Senator Steve Daines agrees in our next highlight. Check it out:

9.0 - daines

Nice, so Daine is advocating for light regulation of crypto. Bullish. Gensler pretty much reiterated more of the same lies and runaround he had been the entire 2-hours of testimony.

I’ve got one more clip I found a bit entertaining to share with you before wrapping up. Democrat Senator Catherine Cortez Masto takes the floor.

10.0 - cortez

So Cortez asked Gensler if he has what he needs to do his job, which is get cracking on regulatory clarity surrounding crypto, and if he doesn’t, then to please enlighten congress so they can try to help.

Gensler submits he needs more money, lol, he needs more workers, needs more bureaucracy, and he needs congress to make the first move towards clarification in the crypto realm. So take that for whatever its worth. I personally am not buying it.

Nice. So all in all, we have a diverse group of senators with a wide range of attitudes towards cryptocurrency right now. 

Gensler continues to tout that innovation should happen within public policy frameworks, which is him passing the responsibility to congress while choosing to regulate through enforcement and litigation, as we’ve seen with Coinbase, Ripple, and we will likely see more in the future.

And of course, he continues to flip flop saying that we have clarity on what is a security and what is not, while also saying the definition of a security is broad, vague, and should be refined by lawmakers through public policy, red tape, bureaucratic BS.

Awesome.

Thank you so much for taking the time to watch this video.

If you enjoyed the content, please make sure to like this video and subscribe to my channel for more crypto content.

So what did you think about the crypto highlights from Genslers testimony before congress?

Which senators did you agree or disagree with?

Is Gary Gensler, in fact, Wall Street’s daddy?

Let me know, in the comments below.

Be safe out there.

Introduction
Pat Toomey Opening Remarks
Payment for Order Flow Explanation
Toomey Doesn’t Think Market is Rigged Against Retail Investors
What About GameStop?
Toomey on Crypto as a Security
SEC Actions are Stifling Innovation in US
SEC Chair Gensler Opening Remarks
Gensler Trying to Distract Congress from Crypto?
Focus on “Investor Protection”
Toomey & Gensler on Cryptos as Securities
Gensler Says Cryptos May Be Securities
Toomey Disagrees that Stablecoins are Securities
Gensler Wants Congress to Clear Up Definition of Securities
Toomey Disagrees & Thinks Securities’ Definition is Well-Defined
Gensler Says Most Crypto are Securities
Summary of Toomey & Gensler’s Discussion
Lummis Asks Why Crypto is Treated Differently
Gensler Lies About Being Open to Meeting with Crypto Companies
Lummis Asks if Gensler Supports Responsible Innovation
Gensler is Delusional About Traditional Markets
Gensler Asks for More Bureaucracy
Warner’s Feelings About Crypto
Tillis Destroys Gamification Argument
Lottery, Legalized Gambling is Allowed to be Gamefied?
Warren & Gensler Have a Scripted Discussion
Warren Slams DeFi & Ethereum Fees
Summary of Warren’s Stance
Daines Asks for Light Regulation of Crypto
Gensler Gives More Runaround
Gensler Flips & Says Securities Definition is Clear
Cortez Asks Gensler What he Needs from Congress
Summary of Cortez & Gensler’s Discussion
Outro