Author: Weilin, PANews

There are only 6 days left before the inauguration of US President-elect Donald Trump. On January 14, Securities and Exchange Commission (SEC) Chairman Gary Gensler consecutively gave interviews to CNBC and Yahoo Finance, and his leadership style and policy legacy have become a hot topic of discussion. Previously, Gensler had announced that he would resign from his position as SEC Chairman on January 20.

Based on these two interviews, PANews has summarized 11 important questions about cryptocurrencies and the capital market, and how Gensler responded to them.

1. On January 14, the US Securities and Exchange Commission (SEC) took action against Robinhood and some private equity firms. With less than a week left in your term, can we expect the SEC to take more action?

We are entrusted by the public to ensure that the capital markets work for them, protect investors, and ensure that people comply with the law. We have an important responsibility, and we will fulfill that responsibility, regardless of who is in charge. There will be a different leadership transition this week and next week, but we will continue to ensure that the capital markets serve investors and that market participants comply with the law.

This is our job. Essentially, how can we build trust in the capital markets if we do not follow the facts and the law? In fact, the honest actors in the market will benefit, because more investors will be willing to enter the market and participate.

2. What do you think the next administration means for the SEC? Are you concerned that the things you've done during your term will be overturned by the next administration?

The achievements we have made during this administration are very significant. I took office after the GameStop event, when there was a huge SPAC boom, and we implemented the most important reforms in the stock market. I would say that we, along with the other commissioners, have completed these reforms in a bipartisan and unanimous way. We have also made major reforms in the Treasury market. I can't imagine anyone wanting to go back to a longer settlement cycle, we've shortened the settlement cycle to one day.

I also can't imagine anyone wanting to revoke the first federal privacy notice given to the public, which states that if your information is leaked by an investment advisor or broker, you will be notified. I dare say that I don't think anyone will want to revoke these measures. They won't make it easier for insiders to trade on material non-public information. So I'm very satisfied with the work we've done.

Of course, democracy has its outcomes, and the next team may choose a different direction, but I think these are good policies for lowering costs and promoting integrity in the capital markets.

3. Some believe that supporters of cryptocurrencies helped Trump win the latest election. How do you respond to these views?

It is important to build trust in the capital markets, and people need to comply with the laws passed by Congress, and this great institution is enforcing those laws. Think about this issue, we have rules on the highway, we have traffic lights, and we have police. If you're driving a hybrid car, does it not have to follow traffic regulations on the highway? Or does an electric car not have to follow the rules on the highway? We are consistently enforcing the law in the financial markets, and the cryptocurrency space is not compliant.

I also want to say that voters are smart enough to know that they are voting based on other issues, such as inflation or other economic issues. I have not seen any evidence that cryptocurrencies are a major factor influencing voter turnout.

4. You have achieved a lot during your term, and you mentioned shortening the settlement cycle, reforming money market funds and the Treasury market, etc. But you lost 4 out of 5 challenges to your rules, which is more than the total of the previous 3 chairmen. Is there anything you wish you could have done differently?

For anyone working in government, this is an interesting time, because the courts are undergoing a lot of change. The great hockey player Wayne Gretsky once said something, but the gist of it is that you should skate to where the puck is going, not where the puck is. The courts are like the puck here, where are the courts heading? They are reinterpreting the law, whether it's environmental law, communications law, health law, or securities law.

We have been acting in accordance with the law, working based on the laws passed by Congress. We have issued 46 rules that are very important for the capital markets, and the vast majority of them have not only been passed, but are already being implemented. So people can now benefit from these rules, such as knowing whether corporate executives are being compensated based on incorrect financial reports, and whether these need to be clawed back. As you mentioned, our reforms in the money market area, but at the same time, the SEC is now able to get better information about private funds. So we have achieved a lot together.

5. You have repeatedly warned of the risks of cryptocurrencies. Over the past year, the courts have to some extent forced you to approve spot Bitcoin and Ethereum ETFs, opening up cryptocurrency investments to the public. Would you have preferred a different outcome? Are investors facing greater risks as a result?

Bitcoin itself is not a security, and neither I nor my predecessors have said that Bitcoin is a security, nor that Ethereum is a security. I believe that investors in Bitcoin and Ethereum, including the public you mentioned, have had the opportunity to invest even before the ETF products. During my tenure, we approved a Bitcoin ETF, which is a spot ETF, and that came later. Investors in the spot trading products have better protection, lower fees, stricter regulation, market surveillance, and these products are registered and consistent with SEC requirements. My predecessors had previously rejected these products, and we followed the leadership of J. J. Clayton. Bitcoin and Ethereum account for 70% or even 80% of the cryptocurrency market. What I'm really concerned about are the other parts, the thousands of tokens that continue to exist, where investors are essentially investing or betting on a project, and they need to be properly disclosed. The law says you should get this kind of disclosure, but these tokens are not compliant at the moment. I don't prejudge any project.

6. You seem to want to separate Bitcoin from the rest of the industry, are you starting to develop a new perspective on Bitcoin? Do you think Bitcoin has intrinsic value and is a store of value? Or do you think that in 10, 15, 20 years looking back, it will become the tulip bubble of the 18th century? You taught at MIT, so you should have some views, and you must have read "The Bitcoin Standard"?

It's hard to predict. I know how you view these other cryptocurrencies, and I know you have a negative view. But as for Bitcoin, we at the SEC have never said it is a security.

Yes, (I've read it), and I think Bitcoin is a highly speculative and volatile asset. But there are 7 billion people in the world, and everyone wants to trade it. Just as we've had gold for 10,000 years, we now have Bitcoin, and maybe we'll have other similar things in the future. These other thousands of projects need to demonstrate their use cases and prove they have real fundamentals, or they won't be able to sustain themselves.

7. Do you not like those other cryptocurrencies?

I have never owned any of these cryptocurrencies, and I have been consistent on this for 7 or 8 years.

8. How do you view the concept of prediction markets, especially Kalshi's decision to hire Donald Trump's son as an advisor?

I have no opinion on who others hire. But the capital markets themselves are vast, $120 trillion in capital markets, whether it's stocks, bonds, or ultimately prediction markets, they are all about predicting future cash flows or predicting future opportunities for businesses. So in a sense, these markets are all about prediction markets, and that's why I'm very proud of some of the reforms we've implemented. We've implemented better information disclosure to ensure that only information meaningful to investors is disclosed, so that they can make their own judgments about the future based on that information.

9. Critics argue that the SEC relies too heavily on litigation rather than legislation. How do you see this?

We have laws. Congress has passed these laws, of course they can be changed. But in the crypto space, the public invests in these projects based on them, and many of these projects are subject to securities law regulation. In this space, many companies have not complied with the rules. In the content you discuss every day, most of it is about stocks, bonds or the fundamentals, valuation, fundamentals and sentiment mix of the market. But the crypto space seems to rely more on sentiment, with much less fundamentals. But if there are fundamentals, and that's a big if, then proper disclosure is required under securities law. That's the basic trading rules.

10. What do you think is the biggest risk in the current market?

We are now in a presidential transition period, and democracy has been manifested. Certain policies will become clearer over time, but policy uncertainty certainly exists. Over the past four years, I have also mentioned that there are some areas in the capital markets where there is a lot of leverage, a lot of borrowing and low margin requirements. These issues usually occur in the so-called repo market where commercial banks provide leverage to macro hedge funds. Finally, I believe that AI has transformed productivity in a positive way across various sectors, but there are still some risks going forward.

11. If you could do it all over again, what would you do differently?

I hope we can complete the reforms of the government bond market and the stock market earlier, and also handle the relevant issues with the courts more smoothly. It is worth noting that the attitude of the courts is undergoing drastic changes. I really hope I can better predict these changes, so that we can do some things that can better cope with the challenges of the courts.