5th December 2021 > > US regulation.

tl;dr

Gary Gensler, chair of the SEC, appears to be backtracking to the detriment of the crypto business.

Market Snap

Market Wrap

Friday’s sell off saw $2.5 billion leveraged longs liquidated. Huobi suffered a flash crash down to $28k compared to the broader market at $43k – again due to the liquidation of the leveraged children.

The biggest position that got closed? A $28mm order on Bitfinex. Ouch! I do hope they learnt their lesson, but I suspect this punter will probably just try to chase back the losses.

Don’t get me wrong, I am not happy about this (temporary) reset of the market, but I do enjoy watching the pain suffered on the leveraged side. The golden rule in cryptos is as always – NEVER use leverage.

Curious Cryptos’ Commentary – Gary Gensler, Chair of the SEC

The CCC had high hopes for Gary’s time as Chair of the SEC. He has intimate knowledge of cryptos, and it was generally accepted that his approach to regulation would be one that helped to foster and develop innovation.

Certainly his initial stance in his new role reinforced this opinion. Very early on, he made a bold bid to try to bring all crypto regulation under his own remit, which could have been a very positive development.

Since that time he has started backtracking.

Futures based BTC exchange traded funds (ETFs) have now got SEC approval. But his justification for this approval is that the underlying futures, traded on the Chicago Mercantile Exchange (CME), are regulated by the Commodities and Futures Trading Commission (CFTC).

That is undoubtedly a public statement that he is farming out regulatory responsibility to other bodies.

And let’s not forget that the returns on a futures based BTC ETF are likely to be significantly worse than those from a physical ETF, for all the reasons we have discussed in the past.

…

Now he is found wanting again.

Following a hearing before the Senate Banking Committee in September, Senator Pat Toomey sent a series of follow up questions to Gary. A key one was this:

"… identify the specific characteristics that distinguish a cryptocurrency that is a security from one that has been deemed a commodity."

Gary declined to answer stating:

"Thus it depends upon the particular facts and circumstances, whether any particular financial instrument, including a crypto asset, is being offered or sold as a security."

I am not suggesting for one moment that this was an easy question to be asked, but it seems the SEC doesn’t even have a view on any of the parameters that might be used to frame an answer.

…

Gary has previously requested that the SEC be given more powers to regulate both cryptos and crypto exchanges.

Instead of leading that debate he now appears content to simply step aside and let others make decisions for him.

This does not bode well for the direction of crypto regulation in the US.

Reserve Treasury Protocols (before they all go to zero