Why Regulations Entrusted to Gensler in 3 Steps: A Cryptocurrency Insight

  • Exploration of Gensler’s rise to prominence in the crypto world
  • Discussion on the impact of Biden’s executive order on digital assets
  • Analysis of the consequences of the LUNA/UST collapse and FTX incident

This article delves into the significant events that have shaped the cryptocurrency landscape, focusing on the role of Gensler and the effects of Biden’s executive order, the LUNA/UST crash, and the FTX incident.

From Obscurity to Stardom: The Gensler Phenomenon

gary-gensler

Just a year ago, Gensler was an unknown figure in the crypto world. Today, he is a key player. This article explores the events that led to his rise and their impact on the digital asset landscape.

Biden’s Executive Order: A Game-Changer

On March 9, 2022, the Biden administration issued an executive order, requesting over 16 government agencies to investigate digital assets within a 6-9 month timeframe. This move, made possible due to the administration’s majority in both the Senate and the House of Representatives, aimed to regulate digital assets through legislative means, a move seen as responsible towards the public.

The LUNA/UST Crash: A Regulatory Nightmare

Stablecoins were at the heart of Biden’s executive order due to their centralized nature and ease of regulation. However, the collapse of LUNA/UST complicated matters as algorithmic stablecoins were not widely understood in Congress, making regulation more challenging. Despite predictions of imminent regulations, the LUNA incident did not facilitate government action but rather complicated it.

The FTX Incident and Biden’s Loss of Majority

The November 2022 elections saw Biden lose his majority in the House of Representatives, disrupting plans for digital asset regulation. The failure of the FTX exchange increased pressure on the government, making digital asset regulation a priority ahead of the 2024 elections. The government resorted to Plan B: regulation through litigation.

Conclusion: What Lies Ahead?

Regulation through litigation implies fitting digital assets within the scope of existing laws. Gensler has since advocated for altcoins to be considered under the 1933 securities law. With the 2024 elections looming, it is believed that the SEC’s regulatory process will conclude this year. The government, wary of a liquidity crunch in the market, will aim to prevent capital flow into crypto. The easiest legal way to achieve this is to leave Bitcoin untouched while regulating altcoins. Spot ETF applications for Bitcoin could be part of this strategy. As outright bans are impossible, exchanges are being targeted to reduce the number of coins collectively. The strength of exchanges’ defenses in court remains to be seen as we approach the first quarter of 2024.

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