As new and revolutionary technologies have improved the economy throughout our nation’s history, Washington has often greeted groundbreaking innovation with disdain if not outright derision.
Theodore Roosevelt, the first president to ride in an automobile, made no secret of his contempt for the invention, calling motor cars a “distinct addition to the discomfort of living.” When electricity was installed in the White House, President Benjamin Harrison was so fearful of being shocked he required his staff to turn the lights on and off for him.
This apprehension should come as no surprise, given that visionary thinking has never been the hallmark of our nation’s capital. Yet rarely does one see the level of deliberate hostility and incompetence directed toward a burgeoning technology that SEC Chairman Gary Gensler has displayed by bungling all attempts to articulate a clear regulatory framework for digital assets and cryptocurrencies.
Crypto has grown from purchasing two pizzas in 2009 to a projected $32.4 trillion in global transactions by 2027. Many other nations have grasped its potential and enacted rules to foster its acceptance and growth. While over two dozen U.S. investment funds have applied to launch crypto spot exchange-traded funds (ETFs) domestically, the U.S. still trails nations such as Singapore, Estonia, and Malta in establishing a coherent regulatory framework. That alone highlights how inept America’s leaders have been in governing this technology.
Instead of working with companies building products on blockchains, Gensler has tried to scapegoat them to expand his agency’s power, unilaterally dictating that nearly all digital tokens are somehow securities under his authority.
A breakthrough legal case involved Ripple Labs, which for years sought guidance from the SEC to confirm that the XRP token used for their payments software was not a security but a transactional currency. For years the agency shrugged its shoulders in response. In Dec. 2020, the agency pounced without warning, dragging Ripple into court, and charging them with illegally raising $1.3 billion in unregistered securities.
Defending the lawsuit cost Ripple $200 million and drove its business expansion outside the U.S., and according to 75,000 innocent XRP users who entered the case it wiped out billions of dollars in value for their holdings. And even though federal Judge Analisa Torres ruled in July that the XRP token is not a security and can be traded freely in blind bid/ask transactions on exchanges, enormous damage was already done.
While Ripple has the resources to soldier on, other companies are not as fortunate. For five years, the SEC harassed and afflicted the New Hampshire start-up LBRY, a company building a blockchain-based content platform to rival YouTube. Instead of giving LBRY the guidance it needed, Gensler filed a lawsuit that forced the company into bankruptcy this year. The futility and waste of a government agency obliterating an American company was best articulated by Gensler’s fellow Commissioner Hester Pierce, who said in her dissent, “This case illustrated the arbitrariness and real-life consequences of the Commission’s misguided enforcement-driven approach to crypto.”
With such determination to bring down the hammer on crypto, one would think Gensler would have demonstrated some level of vigilance concerning the massive criminal enterprise of Sam Bankman-Fried, who scammed over $10 billion from customers and investors at FTX. That assumption would be wrong by a mile.
Far from harassing or investigating FTX, Gensler met with Bankman-Fried and his associates on multiple occasions. With the fallen crypto guru now facing a lifetime in jail, Gensler refuses to tell a soul what was discussed in his conversations with the seven-time convicted criminal. As the person charged with ensuring trust and integrity in America’s securities market, Gensler’s animosity toward the transparency and accountability demanded of his position is beyond staggering.
Congress, to its credit, has pressured Gensler to come clean on his dealings with Bankman-Fried. House Oversight Committee Chairman James Comer has accused Gensler of obstructing Congress, and Financial Services Committee Chairman Patrick McHenry has threatened him with the first subpoena in history against an SEC chair. Aside from facing his failures and misdeeds as a regulator, what else could Gensler be hiding?
Gensler has proven adept at failing to do his job while acting beyond his powers to wreck U.S. companies, injure our economy, and undermine America’s role as the global leader in innovation. It is beyond time for Congress to act and create a clear and unobtrusive framework for U.S. crypto companies and users.
As Gensler remains silent on his secret meetings, other voices should speak up to keep him and his agency in check and make Washington friendly, at last, to innovation and our blockchain future.
Gerard Scimeca is an attorney and chairman of CASE, Consumer Action for a Strong Economy, a free-market-oriented consumer advocacy organization which he co-founded.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.