This is the first of a three-part series based on Gary Gensler’s extensive prior public statements on crypto. Links to parts 2 and 3 will appear here as they are published. 

As the heir-apparent to the Chair of the Securities and Exchange Commission, Gary Gensler’s most critical role in the future of crypto will be his thoughts on how cryptocurrencies intersect with securities regulation.

Where crypto meets the SEC

The SEC has been a focal point for the crypto world’s attention for a long time. While its initial enforcement actions in crypto were largely limited to overt fraud, the 2017 DAO Report was its entry into even the best-intentioned of projects. It was that report that determined that crypto pre-sales could fall into the category of securities offerings.

In the intervening years, however, the SEC has frustrated the crypto community with its lack of clear definitions as to which tokens would not fall into the category. This is a big deal because issuers of securities are subject to rigorous reporting requirements that, critically, complicate the path towards decentralization.

Real-time thoughts on SEC entrance into unregistered offerings

While Gensler left public office as Chairman of the Commodity Futures Trading Commission back in 2014, in the years since he’s left an extensive body of work allowing us to glean at least some insight into his thoughts on initial coin offerings. Not least among these are the actual lectures from his time at MIT, videos of which come from the fall of 2018, at the tail end of the ICO boom. Which Gensler noted:

“The majority of ICOs have failed already. And because they keep failing so fast — by the end of this year or certainly by the middle of next year, over 90% or 95% of them will have failed if you take the whole total. So it’s pretty clear it’s going to come down”

Indeed, Gensler lectured on ICOs just days after the SEC made clear that it would start pursuing ICOs for failure to register: “For the first time, they really talked about illegal securities offerings. So they used the word illegal. And they’re starting to get to the place where they’re shutting some of these down that were not necessarily scammy or fraudy, but just saying you didn’t register.”