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Why so many in the crypto community want SEC Chair Gary Gensler fired

Why do many within the crypto community want SEC Chair Gary Gensler fired? Scott Melker, The Wolf Of All Streets Podcast host, explains why so many in the industry are frustrated with Gensler.

Video Transcript

[AUDIO LOGO]

DIANE KING HALL: Taking a look at crypto, Bitcoin in particular. It's been fluctuating today-- a little up, a little down. It dropped below $25,000 for the first time since March this morning, but got a boost following news from BlackRock.

It's being reported that the world's biggest asset manager is close to making an application to create a Bitcoin ETF. And it will use Coinbase for the market data. Now that comes as a digital finance world faces much broader issues with the SEC filing lawsuit after lawsuit throughout this year, the latest being against Binance and Coinbase calling into question the regulation around several popular coins deeming them crypto asset securities.

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Here to discuss more is Scott Melker, the host of the podcast "Wolf of All Streets," not just Wall Street, all streets. All right, Scott let's get into it. First, let's talk about BlackRock coming into this picture.

We've heard buzz about this before. What does this say to you about the state of crypto, Bitcoin in general. Is it becoming even more mainstream with that kind of news?

SCOTT MELKER: I think it has been becoming more mainstream for quite a long time. And this isn't BlackRock's first foray into the space. They've already been working with Coinbase to allow their high-net-worth clients to have access to Bitcoin and other crypto assets. So there's nothing really new here.

Listen, after the FTX's collapse, I actually sent a tweet out that said, "Watch. Wall Street is about to sweep in and buy up our industry for pennies on the dollar." And it seems that what we have now is legislators and regulators pushing this industry into the comfortable hands of Wall Street and getting rid of the crypto incumbents like Coinbase and Binance that they view as a threat.

So as good as this may be for institutional adoption of the space, it kind of violates the ethos. It's a bit of a dishonest push away from the people who actually built the crypto industry in the United States. We've already seen a number of spot ETFs rejected over and over and over again. It's being litigated with Grayscale in the courts right now against the SEC. I wouldn't be surprised to now see BlackRock move from back of the line to the very front very quickly.

- Right. And so that's what I was going to ask actually. When it comes to some of the Bitcoin ETFs that we've already seen filed for review and approval, we've seen it for multiple years-- they get filed, there's a hefty comment period, it essentially just ends up on the cutting room floor somewhere or just kind of gets held in obscurity or purgatory, whichever way you want to look at it. At the end of the day, you've got companies like Gemini, VanEck, Grayscale as well that put one forward. So if you see a BlackRock now moving forward with this, aren't they destined to take some type of legal action unless BlackRock is, I guess, materially different?

SCOTT MELKER: I would think so, but legal action and crypto go hand in hand at this point. I think we can see that we've seen regulators coming after the crypto industry, the crypto industry going after the regulators. So, yes, I think, that would be par for the course.

I can't imagine how they can justify approving a BlackRock ETF without the others. And as I mentioned, Grayscale is currently in litigation to get their GBTC Bitcoin Trust moved and transferred and converted into an ETF, which has been strangely rejected. There's no rational reason that we should not have a spot ETF for Bitcoin. That would actually protect consumers, which is the mandate of the SEC. It would be a great move forward.

But they gave us a futures ETF, which is an inferior product that was approved a year and a half ago. We have a couple of those that basically just don't track spot accurately and are much worse for the consumers. So it's a real head scratcher why this hasn't happened. And I think it's just because of the activist approach that the SEC is taking towards the crypto industry.

DIANE KING HALL: So speaking of the SEC versus crypto, the SEC is coming down hard cracking down on the industry. You have these lawsuits, whether we're talking about Binance or Coinbase. And one of the pieces that-- the heart of the issue is also the question of whether we're talking about a security or crypto as a security. What do you think about how the SEC is coming after the industry? Is this fair?

SCOTT MELKER: It's absolutely not fair. Gary Gensler needs to be fired immediately. And you've actually seen that the hashtag, fire Gary Gensler is trending partially because of myself, partially because of my show The Crypto Town Hall on Twitter spaces. It's the biggest show in the world. We had Warren Davidson on who's also been tweeting fire Gary Gensler and has put forward the SEC Stabilization Act to do just that.

Listen, Gary Gensler is embarrassed about his relationship with Sam Bankman-Fried that he platformed FTX, was working with them on regulation, that he was going to give them a pass outside of this legislation that they were going to pass. And so he's embarrassed, and he's overcorrecting massively in the opposite direction, trying to take an activist approach against the entire industry. It's absurd. It's unfair.

It's probably illegal. And that will also be litigated in court. But the SEC is way out over their skis. It's Congress's job to determine what these assets are. And Gary Gensler can't even sit on the Congress floor and give the simple answer of whether Ethereum is a commodity or a security when that question is pointed directly at him repeatedly.

He refuses to give guidance, because he would rather be vague and then just go ahead and deem everything as security without actually going after any of those platforms and protocols. It's completely absurd. And he needs to go.

DIANE KING HALL: So, if he were to leave, then who would you want to see in leadership there?

SCOTT MELKER: Well, it's hard to know if the replacement would be better. But we know what we're working with. And we know that he's not acting in good faith. There are SEC commissioners who are extremely rational and have been in favor of freedom and doing the right thing for years.

Hester Peirce is one of them. She's proposed for years the idea of safe harbor, which would allow any project to come in, register with the SEC, and they would have a three-year period to prove that they're sufficiently decentralized and no longer security before they can launch and be listed. That is an extremely sensible approach the way that this should be viewed.

We shouldn't be using the Howey test and securities laws from the 1930s and '40s to apply to digital assets that obviously just do not fit inside that framework. So, yes, part of this is actually that Congress needs to act. They need to put a framework in place. And if you were to defend Gary Gensler, you would say that because the only tool that he has is a hammer, everything looks like a nail. But we all know, like I said, that he's overcorrecting because of his relationship with Sam Bankman-Fried because there's egg on the face of legislators and regulators because of their relationship with him and now retroactively punishing people for the actions of bad actors last year.

Listen, do you think that the mandate of the SEC, which is to protect consumers-- do you think they're doing that when they put out these actions and just list a bunch of random coins as securities without actually deeming why they're going after them? And then those coins crash 30%, which many Americans are holding. Americans are losing money because of the actions of the SEC every single day.

- Even as you're laying out how you would like to see crypto regulated right now too and I guess as we figure out who would be the person to decide that regulation if Gary Gensler, to your, I guess, what you would like to see, if he gets removed at the end of the day then from here on out it's a question of if this BlackRock ETF goes forward, then clearly it's a security probably. And then on the other side of that, what other regulation is there know your customer rules that you believe should be added on in addition to safe harbor? Like, what are three things that you would like to see in regulation in crypto?

SCOTT MELKER: Sure, well, you could say that the ETF itself would be a security. But Bitcoin is actually the one thing that is very clearly a commodity, and nobody is arguing over whether or not it is security. So it seems somewhat safe and largely under the purview of the CFTC.

Safe harbor is a very reasonable thing. I think that we should see some of the great ideas that were proposed in the Lummis-Gillibrand bill last year, which apparently is coming back leaner and meaner, some stablecoin regulation, how stablecoins should be allowed to be backed because those are one of the killer use cases of crypto. KYC-AML is already a huge thing in the crypto space. That problem has largely been solved.

I can tell you that Americans largely are not able to register on platforms like Binance that are overseas. These are things that they're being accused of from 2018-2019 when those things were much easier. The fact is there's never been regulatory guidance in almost any jurisdiction for this industry. So it was either get started and then come into compliance or do nothing at all.

And I think that most of these companies, platforms, exchanges are trying to do the right thing now when it's very obvious. They have the eyes of the world on them. They're not trying to participate in illegal activity and do things that are non-compliant.

So I would say, absolutely KYC-AML are very, very important for these exchanges. Safe harbor is an exemplary idea. And getting some definition of what's a commodity and what's a security would certainly help.

- Just very quickly-- we got to go-- is Robinhood next? We've already seen Coinbase, we've already seen Binance get under the spotlight of the SEC. Is Robinhood next?

SCOTT MELKER: I'm terrible with my crystal ball, and I don't like to guess who might likely be next. But I will say Robinhood is clearly getting ahead of this by delisting the very coins that were listed as securities in the Binance and Coinbase suits. Binance and Coinbase are really crypto-based platforms.

Robinhood is a part of their business. So if anything, I would see maybe Robinhood sadly scaling back on that part of their business and coming into compliance. But I don't think that they'll see the same type of action that Binance and Coinbase and others are likely to see.

DIANE KING HALL: All right, we will have to leave it there. Scott Melker, we appreciate all of your insight and deep dive into the world of crypto. "The Wolf of Wall Street's" host, Scott Melker, thank you.