Proof of State is the Wednesday edition of Fortune Crypto where Leo Schwartz delivers insider insights on policy and regulation.
Crypto has no shortage of villains—you can pick from any number of failed fraudsters who rose and fell faster than the price of Dogecoin after a tweet from Elon Musk. Gary Gensler has come to occupy a different position in the psyche of blockchain acolytes, however, with the chair of the Securities and Exchange Commission finally representing a force outside the industry that everyone can agree to hate.
Most discourse around Gensler reverts to the same tropes: He argues that crypto is rife with misconduct and lawlessness and must come into compliance with existing U.S. securities laws. Crypto entrepreneurs retort that Gensler is engaged in "regulation by enforcement," launching lawsuits against upstanding companies rather than pushing for new rules to govern the nascent technology.
For the new print issue of Fortune, Jeff and I profiled the divisive chair, delving not only into Gensler's approach to crypto but his broader efforts to remake the SEC, which have touched other political third rails from climate disclosures to overhauling the U.S. trading system.
Despite Gensler's caricature status in crypto, everyone I spoke with—including dozens of current and former employees at the SEC and his former agency, the CFTC—agrees that he is a figure driven by his principles, which harken back to the FDR vision of regulating markets through disclosures and rules. Even though Gensler started his career at Goldman Sachs, becoming one of the youngest partners in the firm's history, he bucked any expectations of Washington's ever-revolving door, becoming a champion of the Dodd-Frank era and winning over progressive skeptics. One supporter described him as an "energizer bunny," and his often relentless approach has its blemishes, from a failed attempt to expand the budget at the CFTC to staff burnout.
I had a chance to interview Gensler at D.C. Fintech Week earlier this month. He's an undeniably funny guy, from his infamous tweets (which he told me he comes up with the ideas for) to his reveling in trolling antagonistic audiences. At the end of the interview, he put his hand on my shoulder and said with a smile, "I can tell this is going to be a wide-ranging profile...about crypto," despite my assurances that it would take a broader scope.
Still, it's hard not to feel like crypto is a skeleton key to understanding his overall strategy. In public, lawsuits against figures like Kim Kardashian have allowed Gensler to elevate the rather esoteric agency to a name-brand crusader in the Biden administration's campaign of financial regulation. In private, Gensler has used crypto to tussle with opposition lawmakers and even his old agency, the CFTC. You often hear about the turf war between the SEC and CFTC over crypto jurisdiction, but I was still surprised by the frankness that CFTC regulators used to describe the bad blood between the agencies. One current staffer described the relationship as a "horrible, dysfunctional marriage."
The biggest question for Gensler will be whether his aggressive onslaught of enforcement actions and rulemaking will survive a judiciary creeping to the right, as legal onlookers bandy about scary terms like the "Major Questions" doctrine and the end of Chevron deference. As always, crypto will punch way above its trillion-dollar market cap weight, with lawsuits against players like Coinbase and Ripple hurtling through the court system. Gensler may be halfway through his tenure at the SEC, but his story is just getting started.
You can read the full article here.
Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz
