The mighty Gary Gensler, a devoted ombudsman, or crypto’s number-one public enemy?
Originally a wall street regulator, Gary Gensler’s evolution from a stalwart ombudsman and crypto professor to crypto’s antagonist has been paradoxical. His actions sparked a debate in the crypto realm, with many asking for his resignation. The big question is, should Gary Gensler resign?
This article sheds light on Gensler’s conflict with crypto and why I think he is not the right man for the job.
Meet Chairman Gary Gensler: A legacy of oversight
Gary Gensler is the presiding Chairman of the US Securities and Exchange Commission, an agency waging war against crypto. The SEC boss, a staunch ombudsman, was nominated by President Joe Biden in Feb 2021. Gensler officially took office on April 17, 2021, after Senate approval.
Gensler’s mighty reputation stems from past roles at CFTC, Maryland Financial Consumer Protection Commission (MFCPC) and several others. At CFTC, Gensler served as Chairman between 2009 and 2014, appointed by former distinguished president Barack Obama.
His role at the MFCPC started in 2017 and ended when the body was disbanded in 2019. Before that, the glorified ombudsman served other roles, including as undersecretary for Treasury for Domestic Finance. Gary Gensler has also given crypto-related classes at MIT in recent years.
Gensler’s decorated CV gave him his current job. However, the story has been quite different since taking over the SEC.
Gensler: A tainted crypto CV
Since assuming office, Gensler has built a reputation as a crypto villain. In Sept 2021, while addressing the Senate Banking Committee, Gary Gensler noted that the SEC is working overtime to develop a crypto regulatory framework. The SEC is lacking adequate regulations for the crypto realm, Gensler highlighted.
The Senate banking committee backed Gensler, even pushing for accelerating the timeline. Sen. Pat Toomey of Pennsylvania mentioned the need for clarity and transparency with the regulations before taking any enforcement actions. During this hearing, Gensler first referred to crypto as the “wild west.
This crypto bully called for registering cryptocurrency exchanges, like traditional exchanges. Moreover, Gensler shared his belief that stablecoins cause a conflict of interest leading to market integrity questions.
After FTX plummeted from glory last November, Gensler got the charge and backing to go after crypto projects. In only the first half of 2023, the SEC filed suits against Kraken, Coinbase and Binance.
Ripple’s win: A setback for Gensler’s crypto crusade
Crypto enthusiasts are celebrating Ripple’s triumph against the SEC. While Judge Torres’s decision declaring XRP ‘not security’ continues to cause joy, Gensler’s reaction suggests a continued onslaught on crypto projects. While expressing disappointment, Gensler refused to take the loss and vowed to continue regulating crypto.
The Ripple network win gives new ammunition to crypto exchanges facing the SEC with charges of illegally ‘selling securities.’ For instance, Coinbase attorneys can use Judge Torres’ logic to argue that since the tokens are traded between blind parties, they are ‘NOT’ securities.
Hence, Gensler is likely set up for more losses in the coming years. Gensler-SEC loss of the Ripple case debunked the regulator’s biggest lie, ‘all cryptocurrencies except Bitcoin are securities.’
Tom Emma: ‘Gensler, An Incompetent Cop?’
The crypto antagonist found himself in the lion’s den when he faced the House Financial Services Committee in Feb. When asked by McHenry whether ETH is security, Gensler dodged the question, failing to back his original sentiment that all cryptocurrencies except Bitcoin are securities. This massively frustrated the legislators.
Rep Warren Davinson highlighted possible collusion between Gensler and Sen. Elizabeth Warren to push the anti-crypto agenda. The Senator lists examples of power abuse by Gensler. As a consequence, Warren called for the firing of the SEC boss.
Frustrated by Gensler’s dodging of questions, Rep Tom Emma took his minutes to scold the regulator. Tom Emma even mentioned that Gensler’s approach to cryptocurrency drives the industry out of the US. “Existing SEC rules make no sense for Blockchain companies,” Tom mentioned.
In a bold statement, Tom called Gensler an “incompetent cop on the beat” who puts “everyday Americans in harm’s way and [pushes] American firms into the hands of the Chinese Communist Party.”
Behind the scenes: Gensler and Binance
In a new twist, Binance attorneys submitted to the SEC that Gensler has a personal history with Binance. Based on the attorneys, the decorated ombudsman applied for an advisory role at Binance as the uncertainty of crypto regulation continued.
Gensler, Binance CEO Zhao, and several other Binance employees were in conversation about a position. All this happened before Gensler was appointed for his SEC role. The attorneys argue that a conflict of interest resides with Gary Gensler’s involvement in this case.
Crypto regulation: Led by a non-investor?
Then comes the question of crypto ownership. Rep Bryan Steil strongly asked Gensler whether he owned any crypto. The answer is NO! The Rep pressed further, asking whether Gensler ever owned any crypto in the past, even during his MIT professor days. Again, Gensler said NO.
Why is crypto regulation reliant on a person who never owned it?
How can Gensler truly appreciate crypto if he does not understand the fun, joy, and pain of profiting and losing?
The lack of answers to those two questions gives an entire basis for why Gensler’s crypto crusade is flawed. It is simply a tale of power abuse.
My Take: Gensler should RESIGN!
There’s not much to say than Gensler should resign! His abuse of power, going after crypto projects even with no clear legal foundation, is evidence enough of his failure at the SEC. His desire to frustrate crypto projects while not attempting to create a legal framework aims to achieve just one thing, run crypto projects out of the US.
An SEC head should be partial—a leader who will focus on collaborating with crypto stakeholders to develop proper regulations. Gary Gensler is evidently NOT that leader.
Bitcoin has been attempting recovery today following a sharp decline about 48 hours ago.
The bitcoin market possibly reacted to a WSJ report which triggered FUD about Binance.
Are markets readying for the FOMC announcement?
Bitcoin’s recovery trial after sharp dive
Bitcoin has slightly gained a foot, recording a 0.46% price upsurge, rising from $29.130k to $29.273. The charts suggest that the markets could be poised for a short rally. However, the picture has been quite different in the past 48 hours.
The bitcoin market has been red for nearly 48 hours after recording a sharp decline on the 25th. After testing and retesting its short-term $29.679k support level, Bitcoin broke out, dropping to $28.983k.
Some traders argue that $29.5k is the most plausible retake range. Despite its strong footing in recent hours, Bitcoin will still face stiff resistance at $29.5k, $30k and $30.9k. On the downside, Bitcoin’s support levels are $28.572k and $27.997k.
Reacting to Binance FUD?
Before Bitcoin’s sharp price decline, WSJ released a news article saying, “some Binance US Crypto Trading was a mirage.” The allegations surfaced in the SEC case.
Bitcoin’s sharp decline directly coincided with the time the article was posted, implying that this FUD fueled the price plunge. Of course, the FUD offers a plausible explanation for the recent market trend.
Is Bitcoin readying for Fed announcement?
After Bitcoin’s sharp decline, some market analysts asserted that the markets are readying the FOMC announcement in the next hours. The general sentiment is that FOMC will announce massive rate hikes of 25 bps, sending US interest rates to the 5.25%-5.5% range.
FOMC meets next week (25th-26th). A 0.25% rate hike is anticipated. So far, no further hikes expected beyond July.#FED expectations per Morgan Stanley: pic.twitter.com/9aHfjUr3rv
— Just call me Gēöphph… (@capgains4life) July 21, 2023
After 10 consecutive rate hikes ranging from 25 to 50 bps, the Fed slowed down in June. However, analysts at Morgan Stanley note that the slowing jobs and inflation rise could trigger the FOMC to extend their hikes before making any rate cuts in Q1, 2024. The ongoing economic performance warrants a rate hike.
Several Fed watch tools, including investing.com and cmegroup.com, all point towards possible rate hikes. Based on investing.com, the probability of rate hikes is about 98.3%.
Ultimately, tomorrow-Friday are the important days.
Not only FOMC, but also PCE and GDP will dedicate the trend.
— Michaël van de Poppe (@CryptoMichNL) July 25, 2023
Should crypto exchanges be allowed to defraud investors? Of course not! No one in their right mind would even remotely back that statement. And many in the crypto realm are ready for a regulatory framework to protect investors. But that’s not what the US SEC is doing to crypto projects.
Every other day, it becomes clearer that the regulator has a target on crypto’s back. It’s not creating regulations; it’s just one assault after another. In fact, the million-dollar question in crypto is, ‘does the US SEC plan to kill crypto?’
Who is the US SEC?
The United States Securities and Exchange Commission (US SEC) is a US regulatory arm for investor protection. After the wall street crash of 1929, the US Congress addressed the need for a regulator to prevent similar incidents. Born in 1934, the US SEC came to curtail fraud and manipulation while preserving capital markets’ integrity.
Maintainance of fairness and order in financial markets.
Facilitating fair capital access for small businesses.
In rigorous processes, the US SEC scrutinizes and screens financial markets to oust any wrongdoers. Because of SEC’s determination for about nine decades, financial markets are safer from fraud.
The body consists of 5 commissioners, one of them being the chair, Gary Gensler. Each commissioner serves for a 5-year term before being replaced. Their screening process involves appointment by the president and approval by the Senate. Three of the currently serving SEC commissioners are Joe Biden appointments.
US SEC’s Thirst for Crypto Blood
Despite its good role in investor protection, the ombudsman is overstepping its bounds when dealing with crypto. Most recent SEC actions targeted individual crypto coins, projects and even business protocols.
All altcoins are securities!
Crypto stakeholders secured their first grand triumph after a federal court declared any non-institutional sale of XRP as not a security sale. The victory celebrated across crypto debunked SEC’s biggest attack weapon, ‘the security tagging.’ Earlier this year, US SEC Chair Gensler claimed all cryptocurrencies except Bitcoin are securities, a statement he failed to back when asked before the Financial Services Committee.
Using Howey’s Test, US SEC classified dozens of cryptocurrencies as securities, including DASH, ALGO, XRP, BNB, BUSD, ADA, and SOL. Many of the coins attacked are best-selling high market cap assets. Attacking high-cap crypto coins sells FUD, reducing confidence levels. Consequently, thousands of US-based investors sell their holdings to avoid future losses.
SEC’s spin-off following the loss of the XRP case is intriguing. In an embarrassing twist of meanings, the US SEC statement noted that “the court agrees that Howey test governs security analysis of crypto transactions.”
SEC Statement on Ripple has vibes of young campaign hack spinning on bad facts, vs powerful government agency expected to tell the truth. Do better. pic.twitter.com/NIYc5260rL
There seem to be no limits to SEC’s attacks towards the blockchain realm. Recent legal charges against Binance and Coinbase are cases in point.
Coinbase fell on SEC’s radar for allegedly violating the Securities Act of 1934 regarding the sale of a security. SEC noted that Coinbase operated “an unregistered national securities exchange, broker, and clearing agency.”
Binance’s offence is the alleged violation of US laws by allowing US customers to trade. Both Binance and its head Changpeng Zhao face allegations of deception, manipulative trading and operating an unregistered broker.
Another innovator in SEC’s claws is Alex Mashinsky, the ex-Celsius CEO and founder. Mr Mashinsky took a not-guilty plea for 7 criminal counts in a Manhattan US federal court.
US SEC raised charges of “failing to register the offer and sale of their crypto asset staking-as-a-service program” against Kraken. The exchange settled with a $30 million fine and a declaration to stop the staking program.
All crypto exchanges under SEC’s radar have enormous trading volumes and considerable reputations. The elimination of Binance and Coinbase leaves a big gap in US crypto markets. But, these attacks will resume until all other exchanges bow out or agree to be tied with SEC’s ropes.
Is SEC just Biden’s dirty agent?
President Joe Biden’s standpoint on crypto markets and traders is no mystery. When the debt ceiling dilemma hit the US in May, Mr Biden unwelcomed any deal protecting crypto traders. His statement grouped crypto traders with tax cheats. Since his election, Biden set crypto markets up for invasive grilling by regulators like CFTC, IRS, and SEC.
Gensler’s appointment targeted tightening crypto regulation. Mr Gensler’s reputation was that of a tough regulator, and true to those words, Gensler has never laid back on crypto regulation.
A Forbes article in Jan 2022 mentioned Biden’s desire to probe cryptos for any security-like traits. This came shortly after Gensler’s appointment. And one year later, dozens of coins are securities based on SEC.
Is there some form of abuse of power in the SEC chair’s office? Yes. An unjustified crypto raid is an abuse of power. Moreover, politicising crypto market regulation is out-and-out mismanagement.
SEC plans a dance on crypto’s grave!
You can justifiably conclude that the SEC wants to kill crypto. James K. Flain, a defence attorney, agrees. In a tweet last December, Mr Flain said, “The SEC doesn’t want to regulate crypto; it wants to kill it in the United States.”
Jake Chervisnky, the Chief policy officer of the Blockchain Association, endorses the speculation. In an episode of The Chopping Block, Chervinsky noted the SEC resolved not to try to regulate crypto but instead kill it. And it’s possible that the SEC seeks a complete annihilation of crypto in the US.
Thinking out loud!
However, crypto is too widespread to fail. So, what’s SEC’s target? Money! The crypto industry is a grand source of money. The fines for alleged irregularities and taxes garnered can partly fund Biden’s trillion-dollar infrastructure bill. SEC’s unstoppable march towards crypto projects could be a way of securing funds.
Web3 scams have made the blockchain landscape a war zone. On one side is the crypto community, armed with the desire to innovate and redefine the function of money and its technology. On the other side comes swindlers with zero remorse and the determination to gain fast money, hackers and malicious actors steal from unsuspecting investors. The consequence is billions have been lost.
The enigma of Web3 scams
It’s becoming a popular belief that web3 security will worsen before improving. And indeed, it’s evident from stats before 2022, which show an increasing pattern in web3 scams and security breaches. This security turmoil receded in 2023, with the first half reporting barely a third of the first half 2022.
Are things improving? No! Based on CertiK’s report, about 212 security breaches claimed over $313 million in Q2 2023. In early June, highly industrious scammers swindled over 5k Atomic wallet users stealing about $100 million.
When writing this report, a crisis hovers around Multichain which lost $126 million in another breach. The insecurity dilemma discourages the entry of potential investors to web3. This guide unmasks the main crypto scams and how to steer clear.
Phishing attacks
Phishing is among the most widespread web3 scams. In phishing, the attacker preys on humans’ curious nature. The swindlers send decorated messages with web links, fooling the victims into disclosing confidential data. The web links mimic websites of popular networks, with only minute alterations. Consequently, the attacker gains a gateway to bank account details and logins to crypto wallets.
While these web3 scammers mostly leverage emails, other platforms like Twitter inboxes, phone calls, and text messages are emerging as an avenue for phishing attacks.
How to escape phishing attacks
While prevention is better than cure, there is no concrete prevention to phishing. There is very little you can do to avoid the attacks— the attackers will send you messages on Twitter, email, or wherever. But you can escape the attacks. How?
Don’t open suspicious emails and links — these links are the attacker’s backdoor to your network.
Directly type any web links.
Use anti-phishing email security systems.
Avoid clicking on pop-ups.
Use firewall protection— firewall blocks unverifiable outgoing requests.
Don’t add credit card and wallet details on untrusted sites.
Rug pulls
Blockchain’s rapid evolution brought a rise of DeFi, which is now a center for rug pulls. The ability for anyone to create unverified projects, albeit good, has led to billions in losses. It has become one of the most challenging web3 scams as it’s not always easy to spot rug pulls before they happen.
In rug pulls, developers desert a crypto project and steal everything from liquidity pools. What remains in token holders’ wallets are worthless tokens.
Note: The main offenders in rug pulls are project developers.
Builders leave code gaps during project development, creating backdoors to steal funds. Developers hype the project by promoting it via social media channels. multiple web3 scams have been found to be orchestrated this way through out time.
When launched, the project lures millions in investment. Developers then clean the liquidity pools. The Merlin DEX case followed a similar pattern. Soon after the token drew the required attention, the developers stole all the liquidity.
Unlike phishing which lacks outright prevention, rug-pulls can be completely prevented and avoided. How?
Avoid projects with nameless developers.
Avoid projects with zero liquidity locked — Liquidity lockers were born out of necessity to increase confidence in DeFi. If a project has no liquidity locked, it’s not a good idea to invest.
Vastly research on projects promising high yield or tokens with high pumps at launch.
Avoid unaudited projects.
Avoid projects restricting sales.
Pump and dump schemes
The most prevalent scheme in crypto and financial markets is pump and dump. Chainalysis reported earlier this year that 24% of tokens launched in 2022 had pump-and-dump traits. These schemes exploit investors’ fear of missing out on good opportunities.
The attacker fashions some fake ‘insider information.’ Once the news hits social networks, investors swiftly rush to buy the token, causing a price surge.
As tokens peak, the attacker ditches a large volume of their holding, gaining enormously. Consequently, the token dump, coupled with frustrations around the fake revelations, results in plummets.
Mimosa (MIMO), a crypto project born in March 2021, traded at $4. A few days after its birth, MIMO plunged to the sub-dollar price.
How to escape a Pump and Dump
Dodging pump and dump schemes is as easy as one-two-three. Here are a few things you must do;
Don’t make investment decisions based on hype, DYOR. Promotional campaigns create a market craze, exaggerating the project’s potential. Evaluate the legitimacy of the news source.
Analyze the markets before investing. Check the price demeanour, resistance, support, and other key points.
Don’t invest in projects with high buy walls.
Business opportunity scams
Some web3 scams come in the form of mouth-watering business deals. These scammers prey on investors’ ignorance. They make a promise of high-yielding opportunities for some crypto investments. Have you seen an email asking you to invest in a ‘shit’ coin, promising 10x, 100x, or maybe 1000x gains? Well, that’s how business opportunity scams work.
As pointed out, ignorant investors are the most likely victims of such scams. The aftermath of their reluctance to research is blind investments. Consequently, these investors are duped. The simplest elixir to avoiding business opportunity scams is research.
Can you escape web3 scams?
Yes! All crypto and web3 scams bear similarities, the fake promise of high returns. Any approaches promising extremely irrational returns are likely innovative tricks fashioned to scam investors. If the deal sounds too good, it probably is. Keeping off such messages or emails is the best way to avoid scams.
Cryptorank recently released a report on the crypto market’s performance in Q2 2023. Uncertainty was the theme of this period, with major regulatory and institutional happenings.
Most high-cap crypto projects barely gained
Cryptorank’s heat map depicts misfortune in crypto between April and June. While some high-cap projects registered stellar performances, there was mediocrity in most of the market.
Bitcoin relished a momentary triumph in the period, closing at $30.5k, a 10% gain from the opening value of $28.3k. Of course, the period was not characterized by all upsoars. There were also moments of descent.
As the quarter faded away, Bitcoin increasingly gained more dominance. Dawning the quarter with 46.39% dominance, the coin gently attracted more crypto investors closing at 50.47%. The dominance growth can be partly attributed to price gains as other cryptos plummeted.
Ethereum markets displayed a similar demeanor to Bitcoin’s. It earned a rise of roughly 7% between April and June. At the quarter’s dawn, Ethereum traded at $1821, but towards the end, this coin was valued at $1948. In a similar taste but more hyper price performance, Bitcoin cash surged by 129%.
There was a transmission of the small gains seen in large-cap to lower-cap tokens in the period. For instance, Air Protocol, a crypto service platform, surged 302%. OMAX, a DeFi network, surged 294%. Other big gainers were STAIKA (143%) and Games for a Living (138%).
Bitcoin’s performance versus traditional assets. Source: Cryptorank
Then come the losers. The ambiguity of crypto markets was disclosed as more top-cap coins recorded losses. Red and darker shades of red were the most prevalent market patterns in Q2.
The market negativity cost SOL, XRP, LINK, ETC, DOT and ATOM some minute percentage of their value. MATIC and ALGO were also subject to mass plummets dropping by 37% and 41%, respectively.
The turmoil that hit crypto markets in Q2 was way less than that reported in preceding periods. In Q2 2022, Bitcoin’s return dropped by over 56%. In a similar period in 2021, Bitcoin’s return plunged by 40%.
Despite Bitcoin and Ethereum seemingly gaining, the numbers from the report suggest punctured investor confidence as most of the crypto space lost value.
Bitcoin vs traditional assets
The ambitious crypto coin has rivalled some of the best traditional investment assets since its birth. Born to offer payments, Bitcoin is gradually becoming a gold substitute.
Bitcoin’s performance versus traditional assets. Source: Cryptorank
In the first half of the year, Bitcoin thrived against many of its rivals. Based on data, the coin has gained 84% in value since the year dawned. In this period, NASDAQ gained 31%, S&P gained 15%, Gold 4% and Silver -5%.
A Trendy quarter?
Q2 had no shortage of big developments and unique trends. Some industry-shifting developments include;
Bitcoin Spot ETF
The world of Bitcoin products was rejuvenated with a new bigger player joining the race for spot ETFs. Blackrock, the largest investment manager, filed for a Bitcoin spot ETF in mid-June.
Blackrock’s filing triggered a market frenzy, with several other companies, including Ark Invest, Invesco, and Valkyrie Investments, going for such applications. Grayscale’s Bitcoin Trust saw a massive valuation rise in Q2. This was a consequence of rumours that Fidelity Investments would purchase the trust.
Bitcoin ordinals mania
The ordinals’ craze brought a recharge to Bitcoin markets. Although ordinals gained life in Q1, the second quarter gazed at the peak of these new assets.
Bitcoin’s activity reached new heights when BRC-20 tokens came into the picture. In early May, the Bitcoin-based meme coins hysteria impeded transaction processing. Accordingly, Binance was forced to halt Bitcoin transactions twice, citing network issues.
Consequently, Bitcoin transaction fees climaxed to about $30. The fee surge revived long-dead conversations about Bitcoin transaction charges.
Shanghai upgrade aftermath
Ethereum completed its Shanghai upgrade in April, opening the gates for investors to withdraw staked ETH. Initially, many expected the upgrade to trigger lumpsum withdrawals. However, three months later, the staked ETH’s value only increased to about $23 million.
The regulatory onslaught continues
Regulatory ambiguity persisted with the SEC hastily attacking crypto projects. The US ombudsman has maintained a negative attitude towards cryptocurrency. The regulators seemingly accelerated their crypto attacks in Q2.
In a shocking turn of events, the SEC filed lawsuits against Changpeng Zhao, Binance and Coinbase, all within 24 hours. Imagine the crypto community’s reaction ensuing the events.
While attempting to bring assets under its umbrella, the SEC labelled several more crypto coins as securities. This is an attempt to bring these assets under its umbrella.
CBDCs are still the talk of the town, but the development remains stagnated in the US, China, the UK, and Nigeria.
