If Gensler Goes, Will Crypto Grow?

Did you feel the earth moving under your feet?

That’s the regulatory US cryptocurrency landscape on the verge of a seismic shift. 

SEC Chair Gary Gensler indicates that he may step down from his position following the election of President-elect Donald Trump. 

Will the change at the helm of the Securities and Exchange Commission (SEC) herald a more favorable regulatory environment for digital assets?

Let’s take a closer look at the profound implications for the industry as a whole.

Gary Gensler’s Tenure: A Tough Stance on Crypto

Since taking office in April 2021, Gary Gensler gained a reputation for a particularly, uh, rigorous approach toward crypto regulation. 

Under his leadership, the SEC took a more aggressive stance toward various crypto projects (like Ripple and Immutable), exchanges (like Crypto.com), and token offerings.

Gensler justified the more aggressive approach by consistently maintaining that most cryptocurrencies are securities, which means they fall under the SEC’s oversight. 

This position has been a point of contention, particularly among crypto enthusiasts and firms. They argue for a clearer regulatory framework tailored specifically to digital assets.

In a recent speech, Gensler defended his track record. 

He emphasized that his actions were backed by judicial rulings. And that they were necessary to protect investors from potential fraud and market manipulation. 

Critics argue that his aggressive stance stifled innovation in the burgeoning sector, which led to uncertainty that drove some crypto companies and crypto talent overseas.

A Shift Toward a More Crypto-Friendly SEC?

In the same speech, Gensler indicated that he would follow normal precedent and resign after President-elect Donald Trump takes office. 

Many in the crypto industry see it as an opportunity for a fresh start. 

Trump’s campaign is signaling a more open-minded approach to digital assets. So, there’s a strong possibility the new SEC chair will be more amenable to crypto-friendly regulations. 

The crypto industry hopes for an increasingly balanced approach, where the focus shifts from enforcement to fostering innovation and growth in the industry.

Favorable regulations could alleviate some of the challenges crypto firms face, such as the ambiguous classification of digital assets and stringent compliance requirements. 

Whatever the new SEC chair does, market participants are hoping for clearer guidelines.

SEC Ripple Effect on the Market

The potential for a changing regulatory environment is already impacting the cryptocurrency market. 

$XRP, the native token of Ripple Labs, surged 17% in 24 hours, outperforming other major cryptocurrencies. 

Over the past week – basically, since the election – $XRP has outperformed even $BTC. 

This rally comes on the heels of Ripple’s ongoing legal battle with the SEC, where it has managed to score some partial victories. 

The prospect of a more lenient SEC regulatory approach could benefit Ripple, which is fighting the same battle over whether most crypto tokens – like $XRP – count as securities.

Meanwhile, Bitcoin’s rally appears to have slowed slightly, but traders remain bullish. Some maintain a $120K target for the leading cryptocurrency. 

Ethereum and the Future of Staking in ETFs

One area of particular interest is whether the SEC will view staking differently within the context of exchange-traded funds (ETFs). 

Currently, the SEC prohibits the inclusion of staking assets in ETFs, which limits the potential returns these funds can offer investors. 

Staking, which involves locking up crypto assets to help validate transactions on a blockchain network in exchange for rewards, is a popular strategy among Ethereum holders.

If the SEC relaxed its stance on staking, it could pave the way for ETFs that include staked assets, providing investors with a new passive income avenue. 

It would provide a key (and much-needed) advantage for $ETH ETFs.

Currently, there’s not much separating an Ethereum ETF from a Bitcoin ETF except the underlying performance of the cryptocurrencies themselves.

And on that front, $BTC is up 149% over the past year.

$ETH is up only 56%.

That explains why US Spot $BTC ETFs have seen cumulative net inflows of $27B, while the same $ETH ETFs have only seen $238M cumulative net inflows.

What a New Regulatory Landscape Could Mean

The impending SEC changes could be a turning point for the US cryptocurrency industry, which has long been in regulatory limbo. 

A more supportive regulatory framework could spur growth, attract investment, and cement the US as a global leader in digital finance. 

If Trump’s appointed successor to Gary Gensler takes a more balanced approach, it could foster an environment where the industry can thrive without fear of sudden regulatory crackdowns.

In the meantime, the crypto market is bracing for the usual volatility. 

The next few months could prove pivotal, not just for regulatory policy but also for the broader adoption of digital assets. 

References

• SEC chief Gary Gensler signals resignation in speech defending crypto record (DLNews)