Key takeaways:
Gary Gensler has been on a warpath against cryptocurrency, shutting down firms and jailing crypto founders.
Donald Trump promised to fire the SEC Chair on his first day in office.
Leading contenders to replace Gensler include Dan Gallagher, Mark Uyeda, Hester Peirce, Paul Atkins, and others.
Donald Trump styled himself as the broom of the system during a presidential campaign that courted crypto natives, workers, and nationalists with the choicest sound bites.
Cryptocurrency played a big role, from massive political spending to the number of voters who took a position on it, and through Trump’s gestures as the crypto-bro-in-chief.
Unsurprisingly, one of the memorable sound bites of the election cycle was Trump’s promise to fire the Securities and Exchange Commission (SEC) head Gary Gensler on his first day in office.
It may well have been “one of those” election promises – played to the gallery in the heat of the moment. The third time around, enough voters know how to take the comeback king seriously without taking him literally.
But the roar of approval at the 2024 Bitcoin Conference in Nashville caught even Trump off-guard. “I didn’t know he [Gensler] was that unpopular,” the President-elect remarked, as the crowd nearly drowned him out.
Clearly, Gensler’s case was one Donald Trump’s big-spending hosts were invested in. And so, the promise took a life of its own.
How Gensler Became Number One ‘Crypto Foe’
Gensler is a product of the indeterminacy of American law on Bitcoin and the broader crypto market. With the law vague, the SEC is empowered to decide which token is an investment contract. And it has notoriously pursued tokens and non-fungible tokens (NFTs) with real-world use cases outside speculation.
Under Gensler, the regulator has taken a record number of enforcement actions against crypto companies. In 2023, the Commission pursued 53% more actions against the industry than in the previous year.
Furthermore, during his three years in office, Gensler’s tenure has been responsible for 50% of the enforcement actions that the SEC has taken against the crypto industry since 2015, according to crypto venture firm Paradigm.
The $238 million spent by the crypto lobby supporting pro-industry candidates still pales in comparison to the $429 million lost by the 100-member Blockchain Association fighting the SEC.
The moral of the story is that regulating cryptocurrency under the current laws is as much a matter of philosophy as it is of law.
Trump can pay back the support of the crypto universe by appointing someone who does not have a vindictive agenda against the industry.
Gary Gensler. Image credits: Gary Gensler/X
Gensler Isn’t a Soft Target, But Trump Has Options
Politicians campaign in poetry but govern in prose. America’s new crypto president will soon find that even he is not exempt, as his first target in shuffling the deck may run into legal challenges.
Gensler’s tenure is valid till 2026. U.S. law and judicial precedents establish that a president cannot fire the head of an independent commission “without cause.”
To please crypto natives, Trump would have to violate a democratic principle put in place to limit executive powers, and potentially eat his words when Gensler is reinstated by a court of law.
But some experts believe the SEC chair will step down when Joe Biden leaves office in January. Others have suggested Trump can demote Gensler to a mere commissioner.
Trump could also explore grounds for firing Gensler “with cause,” although this would break with precedent.
We look at Trump’s options for sending Gensler home and his potential replacement picks. (The candidates are listed in no order of importance.)
Hester M. Peirce
SEC commissioner Hester Peirce, affectionately known as “crypto mom” in Bitcoin circles, sits on the friendly side of regulatory ambiguity.
She is favored by some big shots in the crypto lobby to take over from the embattled Gensler.“ She would be the best choice,” Coinbase CEO Brian Armstrong endorsed Peirce on X recently. “Smart, fair, professional. Can work with both sides,” he said.
As Peirce noted, the SEC has been bestowed with too much power, which requires sensitive and conscientious discharge. Her analogy is that the regulator has been given a blank menu, like an Omakase chef whose customer’s order is, “I will leave it up to you.”
In a dissenting opinion, co-authored with Mark T. Uyeda, also favored for the top job, Peirce argues against a ruling by the SEC that an exclusive restaurant, Flyfish Club, should have registered its membership non-fungible tokens (NFTs) as securities.
“The Commission can change its menu to include a healthy serving of guidance to give non-securities NFT creators the freedom to experiment,” Peirce and Uyeda wrote in September, adding:
“Leaving crypto to be addressed in an endless series of misguided and overreaching cases has been and continues to be a consequential mistake.”
Peirce’s seat on the Commission expires in June 2025. While her philosophy might steer crypto regulation in the positive direction, she is understood to be gunning for a much more technical role as head of a task force reassessing SEC’s approach to the industry.
Mark Uyeda
Along with Peirce, Uyeda has reliably championed crypto, albeit outnumbered within the SEC. He wants to make good on the election outcome with respect to promises made to the crypto community.
“The Commission’s war on crypto must end, including crypto enforcement actions solely based on a failure to register with no allegation of fraud or harm,” he said in a recent interview with Fox Business.
“President Trump and the American electorate have sent a clear message. Starting in 2025, the SEC’s role is to carry out that mandate.”
Uyeda’s advantage over Peirce is that he actually wants the job. “I’d give decent odds to Uyeda,” said Jake Chervinsky in an X update, although he also expects Trump to bring in an all-new candidate of his own.
Paul Atkins
George Bush-era SEC commissioner Paul Atkins has the progressive resume Trump could use at the regulatory body. Since stepping down at the end of Bush’s term, Atkins has leveled eloquent opposition to Dodd-Frank, a package of rules applied after the 2008 financial crisis meant to effect sweeping changes to the U.S. financial regulatory system.
The post-recession law is opposed by states and businesses for giving the federal government “unprecedented and unchecked power.” It is in this context that commissions like the SEC have been empowered to conduct “regulation by enforcement.”
Atkin’s SEC tenure also marked him as an ideal candidate in the Trump era, according to CNBC. The former commissioner opposed hefty fines for companies violating securities laws. In recent times, he has dabbled in crypto advocacy through the Token Alliance.
Richard Farley
When Trump won, his crypto-leaning ally Robert F. Kennedy Jr. sent Robert Farley a five-thumbs emoji to suggest something might be cooking for the boys, the New York Post reports.
The President-elect may be looking to hunt with his own hounds, which would see him scout his man outside the SEC. Farley, a partner at law firm Kramer Levin Naftalis & Frankel, has both the proximity and resume to be a top pick for Trump’s transition team.
His claim to fame includes representing prestigious banks like Goldman Sachs, UBS, and Credit Suisse in financing deals. At the law firm, Farley chairs the leveraged finance unit, handling leveraged buyouts for companies.
Dan Gallagher
Potential pick Dan Gallagher has taken the war against Gensler to Congress before. Speaking before a congressional task force, Gallagher argued that the SEC under Gensler was anti-innovation.
Gallagher was a Republication commissioner at the SEC during the Barack Obama era. His strong positions included opposition to the Dodd-Frank Act and the sweeping powers of the Federal Reserve.
He is currently the chief legal officer at Robinhood but has acknowledged the interest his name has garnered concerning Trump’s transition team. Per Politico, he counts it “an honor to have my name included in any discussion of who may be the next SEC chairman.”
Robert Stebbins
Robert Stebbins was crucial in the 2016 transition, as he helped Jay Clayton, SEC chair under Donald Trump, to make appointments to the commission.
He subsequently joined as SEC’s chief lawyer in 2017, advising on 85 rules and more than 2,750 enforcement actions in that capacity, according to Willkie. Stebbins currently heads the high-end law firm Willkie Farr & Gallagher.
He has been a counsel in multi-billion dollar acquisitions involving Morgan Stanley, Pfizer and others. He is the only candidate without a direct link to cryptocurrency, Politico reported, citing conversations with industry experts.
Chris Giancarlo
Hounded offshore by the deep state, crypto found an enthusiastic ally in Trump-era Commodity Futures Trading Commission (CFTC) head J. Christopher Giancarlo.
The then CFTC boss earned the moniker “CryptoDad” for helping the industry secure Bitcoin trading futures. His role is captured in the memoir, “CryptoDad: The Fight for the Future of Money.”
Giancarlo is the founder and director of The Digital Dollar Project, which focuses on strategies for “future-proofing the U.S. dollar.” He also serves as an advisor at the Wharton School of the University of Pennsylvania.
Giancarlo holds various board and advisory positions with organizations like the American Financial Exchange, the Chamber of Digital Commerce, Nomura Holdings (NMR), and the Chamber of Commerce.
Heath Tarbert
According to CNBC, Heath Tarbert, chief legal officer at stablecoin issuer Circle, is also in the run for Gensler’s post. His claim to fame includes a CFTC record for most cases in a fiscal year, The Financial Times reports.
Tarbert headed the Commodity Futures Trading Commission between 2018 and January 2021.
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