Gary Gensler, Wall Street’s New Watchdog, Has a Full Plate

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Gary Gensler, Wall Street’s New Watchdog, Has a Full Plate

Mr. Gelzinis said Mr. Gensler would probably draw on his familiarity with the subject matter — he taught classes on blockchain technology at the Massachusetts Institute of Technology — to approach regulation around digital currencies more strategically. That would be a departure from his predecessor Jay Clayton, who favored enforcement actions against initial coin offerings without providing much regulatory guidance, he added.

Paul Grewal, chief counsel of Coinbase, the cryptocurrency exchange that went public last week, said the industry was “hopeful” about Mr. Gensler, noting that he is fluent in its language. Mr. Grewal said the industry wanted Mr. Gensler to provide clarity on how securities regulators decide when a digital asset is considered a security and subject to S.E.C. review, as opposed to a currency that is largely free from S.E.C. oversight.

The question grew in importance after the S.E.C. sued the San Francisco company Ripple Labs in December over the sale of its popular digital tokens to the public. The S.E.C. said the company was selling unregistered securities, while Ripple and others said the tokens should be classified as a digital currency. The enforcement action was one of the last brought before Mr. Clayton stepped down as chairman in the waning days of the Trump administration.

More recently, a brokerage affiliated with Sustainable Holdings, a financial technology company, asked the S.E.C. to weigh in on whether nonfungible tokens, which are being used to create digital art, are securities that require registration. The company, in its letter, asked the S.E.C. “to engage in a meaningful discussion of how to regulate fintech companies and individuals that are creating NFTs that may be deemed digital asset securities.”

Mr. Gensler, while teaching at M.I.T., acknowledged that regulators had struggled with how to treat digital assets. In a 2018 interview, he said digital assets could at times appear to be both a commodity and a security. At his Senate confirmation hearing, Mr. Gensler spoke strongly for heightened requirements for companies to disclose climate risks and diversity efforts.

“Diversity in boards and senior leadership benefits decision-making,” he said.

Mr. Gensler declined to be interviewed.

One thing the past three months have shown is that the stock and bond markets have a way of quickly writing the agenda for anyone who leads the S.E.C. That means SPACs will almost certainly be scrutinized. In particular, Mr. Gensler will have to determine whether these blank-check companies are a good market innovation for taking fledgling companies public or an investment vehicle that has the potential to harm retail investors, Mr. Hawke of Arnold & Porter said.

Source: New York Times

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