Crypto's great villain, Gary Gensler, finally made crypto fans happy. Not because he finally did something good for crypto. But because he got his backside handed to him in a congressional hearing:
There is quite a bit to unpack here, so let's cover:
What this hearing was about
What Gary Gensler got grilled on
What this means for crypto
What Was the Congressional Hearing About?
Congressional hearings collect and analyze information ahead of policy-making. With a couple of crypto bills stranded in the wheels of Washington's legislative process, the hearing on Tuesday was to provide some clarity for things to move forward.
The hearing was scheduled in advance, with SEC Chairman Gary Gensler set to appear to testify on his agency's role in and approach to crypto legislation. Gensler had already stated that, in his opinion, the SEC has the authority to regulate crypto. In a statement we all know too well, Gensler reiterated his view that "most crypto tokens are securities."
With the stage set for the hearing, you will not believe what happened next...
What Gary Gensler Got Grilled on?
Gary Gensler has been crypto's main antagonist for a while now. His constant bickering over whether ETH is or isn't security has driven crypto proponents mad. But he faced a worthy opponent on Tuesday in North Carolina Republican Patrick McHenry, who made the list of top pro-crypto politicians in our Ultimate Guide To Crypto Regulation in 2023.
If you haven't watched the clip above, here it is one more time, just because it was so beautiful. McHenry put Gensler on the spot about the "security or not?" question:
The clip went viral on Crypto Twitter, not least because Gensler was visibly shaking when he tried to weasel out of answering the question with a simple yes or no. But it was not the only time Gensler was made to look uncomfortable.
When asked about the failure of Signature Bank, Gensler tried to establish a connection to the crypto industry. But that's not at all what happened, said NY Department of Financial Services Superintendent Adrienne Harris:
Want another example of Gensler looking like a poorly-prepared pupil that's been summoned to the board?
Here's one. Congressman Warren Davidson tried to elicit from Chairman Gensler whether ETH is a security by quizzing him about Ethereum Max:
Don't worry, there's more. Tom Emmer from the Congressional Blockchain Caucus gave Gensler the Congress equivalent of a hairdryer treatment in a five-minute dressing-down, covering everything from lack of regulatory clarity over bad enforcement to pushing the industry into China's hands. This one is well worth watching in full:
So what would be the appropriate course of action here? Congressman Davidson thinks it's time for Gensler to find a new job:
This is just a best-of-dunking-on-Gensler video compilation. But as fun as that is to watch, what actionable steps are next for the crypto industry?
What Does This Mean for Crypto?
Crypto Twitter was obviously stoked by Gensler's poor showing at the hearing. Erik Voorhees had a PG-take on the entire situation:
Congressman McHenry reiterated what he said in the hearing. Gensler is doing nothing right and is driving the industry against a wall:
But it's become painfully obvious to everyone on Crypto Twitter and beyond that Gensler can't or doesn't want to do a proper job of giving crypto regulatory guardrails:
So where does crypto go from here?
Gensler has the backing of crypto's second main anti-character, Elizabeth Warren. Small wonder that his pre-prepared answers did not pass the stress test of congressional Republicans:
Gensler maintains the SEC is in charge of, and open to, exchanges operating according to its guidelines as long as they register. Unfortunately, that has time and again been proven to be false, with Coinbase being the latest target of the SEC's trigger finger. To the utter surprise of no one, Coinbase secured a Bermuda license and plans to launch an offshore exchange ASAP. Pushing the crypto industry overseas is not just a narrative. It is happening.
Although it's true that positions on crypto are mainly split across party lines (Democrats against, Republicans pro), it's not as easy as changing the party of the President and all will be good. The SEC may or may not become more pro-crypto under a Trump II or De Santis administration (even though there's no love lost for crypto on Trump's end).
But until that could even happen, there's a good 18 months or so to go. Many more exchanges and other builders will have to deal with the unclear regulatory situation in the US and decide that it's not worth the pain. Less clarity and transparency lead to less innovation, less protection of retail against scams, and more talent leaving.
As fun as the hearing may have been, there are few reasons to laugh for the crypto industry at the moment.
