On April 14, 2021, the Senate confirmed Gary Gensler to be the next Chairman of the Securities and Exchange Commission. Chairman Gensler assumes leadership of an agency that is facing a number of politically charged issues, such as “meme trading”; payment for order flow; and climate change and environmental, social, and governance matters.
Under Chairman Gensler, the SEC also has the opportunity to provide much-needed clarity concerning the applicability of the federal securities laws to digital assets, FinTech, and blockchain companies. Chairman Gensler, who is well versed in blockchain technology, has praised its innovative potential, while expressing concerns about the risk for fraud and abuse.
Chairman Gensler has an established record of favoring increased regulation. For example, he advised in the drafting of the Sarbanes-Oxley Act of 2002 and, as Chairman of the Commodity Futures Trading Commission (May 2009 – January 2014), he led its adoption of sweeping rules governing the swaps markets.
Chairman Gensler may explore (i) adding SEC rules and regulations tailored to digital assets, and (ii) asking Congress to pass legislation to that specifically gives the SEC jurisdiction over cryptocurrencies. Any such efforts may encounter opposition from other federal and state agencies that have asserted jurisdiction over digital assets. He also may face internal resistance from Commissioner Hester Peirce, who advocates a more free-market approach.1
Some market participants may view any attempted regulation over digital assets as antithetical, while others may welcome greater regulatory certainty.
SEC’s Approach to Digital Assets under Chairman Clayton
Under former SEC Chairman Jay Clayton, the SEC