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13th February 2023 > > Gary Gensler.


Gary Gensler is at it again.

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Market Wrap

The uncertainty being caused by a scatter gun approach to regulation (see below and yesterday’s CCC) is proving to be a significant headwind for crypto prices.

Curious Cryptos’ Commentary – Gary Gensler again

Gary Gensler, Chair of the SEC (Securities and Exchange Commission) is on a personal mission to regulate cryptos through enforcement actions, rather than the usual method of developing rules and regulations, and then building a consensus around those rules and regulations.

The description of him by his boss Hester Peirce, Commissioner for the SEC, as “paternalistic” and “lazy” appears to have only increased his appetite for his unorthodox and inappropriate approach to cryptos.

Yesterday, the WSJ (Wall Street Journal) reported that Paxos Trust Co. is being sued by the SEC for violating investor protection laws.

Paxos is the owner and issuer of two stablecoins – BUSD (Binance dollar) and USDP (Paxos dollar).

Note that BUSD is created under a licence to use the name Binance. BUSD has a market cap of $16bn whilst USDP is just shy of a yard.

And for good measure, Paxos is also the owner of itBit centralised cryptocurrency exchange ( which has a side line in brokering larger sized trades for retail and institutional investors off-exchange.

Stablecoins are a potentially lucrative product for the issuer.

Receiving fiat in exchange for issuing the stablecoin, that money should go into cash and cash like investments such as short-dated US treasuries. Now that the US has moved on from the disastrous policy of QE (quantitative easing), three-month treasury bills are yielding over 4% compared to 0.25% a year ago. That implies around $700mm investment income for Paxos from its two stablecoins, with very low, or non-existent, marginal costs.

Nice work if you can get it.

The Treasury Department stated in 2021 that stablecoins require their own regulatory framework and recommended that they only be issued by banks. Both suggestions have their merits, but there has been no follow-up allowing Gensler and his band of naysayers to take advantage of this regulatory void.

The enforcement action, known as a Wells notice, alleges that BUSD and USDP are unregistered securities. To be fair to Gensler, the SEC did state last year that stablecoins would be an area of focus, so this action has come as no great surprise.

There is a problem though.

Gensler keeps repeating the line that crypto firms just need to come in to talk to the SEC and fill out a few forms on a website.

In reality, the SEC is not providing the means for crypto firms to talk to them, and there are no forms in existence that would allow crypto firms to register with the SEC. The situation gets ever messier.

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