This is the third article in a three-part series based on Gary Gensler’s previous in-depth public statements on crypto. Here are parts 1 and 2.
Cointelegraph has been diligently searching for a treasury of the thoughts of future chairman of the Securities and Exchange Commission, Gary Gensler, on cryptocurrencies. especially from a series of lectures he gave at MIT in the fall of 2018. A particularly notable element of his thinking Gensler’s apparent respect for Bitcoin’s internal governance mechanism and his apparent interest in such decentralization elsewhere in finance.
12 years after BTC’s Genesis block, there aren’t many serious figures in the U.S. federal government declaring something as fake as a Bitcoin ban. Even the antagonists acknowledge that such a measure would be impossible. Beyond tolerance, however, Gensler is clearly intrigued by Bitcoin’s mechanisms for internal decentralized regulation and optimistic about the application of its principles in other areas of finance.
Gensler goes decentralized
The SEC is known to have ruled that Bitcoin is a commodity that falls within the purview of the Commodity Futures Trading Commission (of which Gensler was chairman during the Obama years) than the SEC. Consequently, Gensler’s decisions at the SEC will be fairly indirect as to how they affect the original cryptocurrency, but his overall assessment of Bitcoin’s governance shows a refreshing level of insight, as well as an obvious respect for the principles of decentralization. .
“There has been a lot of effort that has died, even Bitcoin, to solve the puzzle we were talking about: peer-to-peer money with no central authority,” Gensler said when discussing Satoshi Nakamoto’s original white paper with a packed conference room. Not only was he impressed with Bitcoin’s technological performance and its “monetary policy that restricts the supply of coins,” he also endorsed the ability to conduct transactions without third parties.
“When it comes to a central authority, a commercial bank, they can decide whether or not to grant loans. It’s a form of censorship. It is a way of assigning something “, Said Gensler. “However, distributed decentralized platforms are more resistant to censorship.”
It is almost paradoxical to think of someone so deeply rooted in the traditional centers of financial power. Prior to his career as a regulator, Gensler began working in the finance department at Goldman Sachs. Most of it comes from the energy centers, which makes it remarkable that it identifies established industry players who are pushing for regulation at the expense of new startups:
“One thing that wasn’t mentioned is that institutions sometimes want to be regulated over time because that creates barriers to entry. It’s usually not in the early stages. But later on, it creates some barriers to market entry, and it is actually established companies that often charge economical rents. “
The many costs of mining
Mining is obviously a central feature of the Bitcoin governance system. It’s also particularly controversial, with recent estimates supporting it The Bitcoin network uses more energy than the Netherlands. In fact, poor publicity about Bitcoin’s power consumption has resulted in an increase in Renewable energy company enter the industry. However, Gensler took the time to defend Bitcoin’s energy consumption against the many overlooked external effects of all other monetary systems in the world:
“I want to point out that all hard currencies, hard money, have had something to limit supply for centuries. And now we’re doing it electronically and through this mining. That doesn’t mean it’s the best use. I’m just saying it’s different. Extracting gold from the ground is very difficult. And in the 19th century, having large vault doors and security guards with guns to keep them safe was a way of doing things. And you could even say that central banks generate costs. I see it as a compromise between securing a currency and a more difficult currency to create. “
There are limits, however
Despite his clear sympathy for decentralization, Gensler is not exactly optimistic about Bitcoin. “We’re not going to be minimalists or maximalists of Bitcoin. To show myself here, I am probably a bit minimalist in the middle of Bitcoin “, he says to his classroom right away. He later told the class that he did not own Bitcoin himself, although it could be OPSEC (Security Operations) as always.
With regard to mining, Gensler pointed out some long-standing concerns in addition to energy consumption. One thing is that mining pools have effectively centralizes the system, what does a 51% attack is more likely. Another reason is that Gensler suspects that the most successful miners do this because of illegal activity:
“I really believe, but I can’t prove it with facts, that several of the largest mining pools or miners are in places where they are doing illegal activities. You get electricity from the bad actors for less than it actually costs on the net. “
Even these problems with the specifics of Bitcoin do not mitigate the fact that Gensler clearly believes in the importance of government decentralization. “I like the democratization of the capital markets better,” he says at one point.
What does it all mean? Gensler is certainly not a crypto anarchist, and he is definitely not interested in rolling crypto regulation back to 2018. But his sympathy for financial decentralization is clearly strong. In his lectures, he agrees with the strong protection of the privacy of transactions and the process of crypto tokens starting their life cycles as centralized projects before they become decentralized currencies. This will be a critical area at the SEC, especially as the co-commissioner pushed for a safe haven for such projects last year.