The Securities and Exchange Commission (SEC) entered a dark period during the tenure of former Chairman Gary Gensler. Ambitious and smart, Gensler sought to appease his political allies to earn a higher position in the Biden/Harris administration by pursuing radical policy goals, ignoring the SEC’s broader mission. His decision to regulate the emerging digital asset sector by enforcement displayed a profound inability to recognize the future of finance, causing Gensler to miss an opportunity to become a transformative leader in the history of finance. Instead, Gensler will land in the annals of bad governance and disservice.
Today, it has been widely reported that Coinbase (NASDAQ:COIN) has won a moral victory in the battle with the Biden administration and the SEC.
Coinbase Chief Legal Officer Paul Grewal, writing an Op-Ed in WSJ.com today, shares:
“In February, we reached a Freedom of Information Act (FOIA) settlement with the Federal Deposit Insurance Corp. after exposing a secret campaign to cut the crypto industry off from the banking system. Now we have forced a second reckoning: a settlement with the Securities and Exchange Commission after our FOIA suit revealed shocking admissions about the agency’s loss of nearly an entire year of its own senior officials’ communications from the height of its anti-crypto campaign.”
Grewal reports that in 2022, the FDIC sent dozens of letters to banks intimidating them not to bank (debanking) crypto-related firms, something the agency denied the following year. The FOIA request uncovered the truth of the pernicious and authoritarian activity by a regulator that played politics to the detriment of its stated mission.
A FOIA request directed at the SEC regarding deleted text messages involving former SEC Chairman Gensler that should have been archived for transparency requirements has now ended in a settlement. Coinbase has been awarded $150,000 due to the incompetence, or perhaps nefarious activity, of the Gensler Commission.
Be it debanking individuals and organizations or the pursuit of goals that undermine the mission of the federal government, the populace should demand more from our representatives and appointed officials.
The Coinbase victory is more than an isolated win. It is a saga that highlights the damage of regulatory overreach and political weaponization that harm consumers and businesses, with costs borne by the public. This is a cautionary tale for policymakers and regulators who set goals beyond their portfolio of responsibilities. We need policymakers who are willling to support responsible innovation rather than stifle it. While objectives may be simple, accomplishing these ambitions can be hard. It is unfortunate that Washington too frequently annoints those who can deliver molifying rhetoric but fail when it comes to execution.