Finance, Government

Know Your Regulator: MIT Professor, Cryptocurrency Lecturer Gary Gensler Sworn In As SEC Chairman

The new leader of the Securities and Exchange Commission is a bitcoin nerd, former Goldman Sachs partner, and fierce investor advocate all rolled into one.

By Jonathan Wolf  
on

(Photo by Andrew Harrer/Bloomberg via Getty Images)

The opaqueness federal agencies are known for is not a design feature as much as it is an ancillary consequence of a complicated world. Nobody is necessarily hiding how these organizations are run or what they are doing. But with at least dozens of these federal entities in existence — and maybe hundreds, depending on how you define “federal agency” — it can get a bit overwhelming.

Still, getting to know certain federal agencies is worth the time. For anyone even tangentially involved in the financial industry, the swearing-in of the new U.S. Securities and Exchange Commission (SEC) Chairman, Gary Gensler, is the perfect excuse for a little review, as well as a glimpse into what to expect in the coming months.

The SEC is headed by five Commissioners, each of whom serves for a five-year term. The President of the United States appoints the five Commissioners, with the advice and consent of the Senate. The President also designates one of the five Commissioners as the SEC Chairman, the agency’s top executive. The terms are staggered so that the term of one of the five Commissioners ends on June 5 of every year, although a Commissioner may serve for about 18 months after the expiration of his or her term if a replacement is not confirmed before then.

For the first few months of 2021, the Acting Chair of the SEC, Allison Herren Lee, was responsible for implementing the new direction of the agency under the Joe Biden administration. Now, though, Gary Gensler will be taking the reins as Chairman. His confirmation puts the Commission back up to full strength at five members. Of the five current Commissioners’ terms, Ms. Lee’s is the first set to expire, in 2022.

The confirmation process for Mr. Gensler moved relatively quickly after he was selected for the position of SEC Chair by President Biden on February 3. On April 14, three Republican senators joined all Democratic senators in a 53-45 Senate vote to confirm Mr. Gensler. Most Republicans were against the nomination because of Mr. Gensler’s apparent intentions to broaden the SEC’s regulatory activities. Following his confirmation vote, Mr. Gensler was sworn in on April 17.

Republican fears of increased regulatory efforts may be genuine. During his Senate banking committee confirmation hearing, Mr. Gensler praised bitcoin and other cryptocurrencies as “a catalyst for change,” but also emphasized his duty was “at the core, [to] ensure investor protection.”

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“I’m concerned he will cause the SEC to use its regulatory powers to advance a liberal social agenda focused on issues such as global warming, political spending disclosures, and racial inequality and diversity,” Republican Senator Patrick Toomey said in the course of the debate over Mr. Gensler’s confirmation. Senator Toomey argued that securities laws were not the “appropriate vehicle” to address these issues.

Mr. Gensler’s cryptocurrency background is somewhat unique among those in SEC leadership roles. He is a senior advisor to the MIT Media Lab Digital Currency Initiative, and as a professor at MIT Sloan School of Management, he taught the courses blockchain technology, financial technology, digital currencies, and public policy. Cryptocurrency aficionados are hopeful that with Mr. Gensler as Chairman, the SEC will finally approve a bitcoin exchange-traded fund before the end of 2021.

Despite his fintech street cred, other aspects of Mr. Gensler’s resume are pretty much par for the course within the higher echelons of federal financial regulatory agencies. He is a former Goldman Sachs executive, and worked within the Clinton and Obama administrations.

“I feel incredibly privileged to join the SEC’s team of remarkable public servants,” Mr. Gensler said in a public statement following his swearing-in. “As Chair, every day I will be animated by our mission: protecting investors, facilitating capital formation, and promoting fair, orderly, and efficient markets. It is that mission that has helped make American capital markets the most robust in the world.”

Well, I think we can all wish him success in that broad mission. As far as what to expect on a more granular level, only time will tell, of course. But the smart money is on more robust financial industry regulation in the coming months, and we might even see the SEC take a head-on approach to cryptocurrency markets under the leadership of Chairman Gensler.

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Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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