Crypto-hating Gary Gensler bites the bullet by aiding the ‘Wild West’ of investing
So Gary did it. The famously crypto-hating chairman of the Securities and Exchange Commission, the man who so reviles digital coins that he called the market the “Wild West” of investing, filled with looters, drug dealers and con artists, took a giant step last week toward mainstreaming crypto as an asset class.
On Wednesday, the SEC finally approved the sale of exchange-traded funds that follow Bitcoin’s “spot” price. ETFs, of course, are baskets of securities that often track an underlying index or an investment style; they’ve become increasingly popular with small investors who don’t want to own shares outright. If buying a bunch of Apple is too expensive, you can be an Apple investor buying an ETF that holds the stock, at a marginal cost.
For a small fee
The Bitcoin ETFs work the same way: They follow the daily price of Bitcoin so you don’t have to shell out all that cash to own it. You can just call up your broker, or use your Robinhood app, to seamlessly purchase a piece of this evil crypto casino.
And as I said, it’s cheap: A single Bitcoin goes for around $43,000 — not exactly money a lot of average folk like your Aunt Millie have lying around. Now she can get a piece of it for a small management fee — as low as .2% and without going through the hassle of buying fractional shares.
For a few basis points your Aunt Millie can do her part to facilitate liquidity in the global drug trade.
All kidding aside, if crypto is so bad, why did Gary Gensler go there? I have my theories.
First, drug dealers do use crypto like Bitcoin to transact business, but they also use dollars as well. There are lots of ways to finance illegal activities outside the US banking system and its suspicious activity reporting system. Gensler has been around banking long enough to know that no matter how much of a crypto hater he is.
Plus, he probably had no choice. I’m no crypto bro, but for all the hair on this market, it’s not going away. Courts have pushed back on some parts of his regulatory crackdown. Digital coins also survived the crypto winter; Bitcoin fell from nearly $69,000 to below $17,000, and some say it could soon race back up to its high of $69,000.
Crypto has survived the crash of FTX, and the fraud, arrest and imprisonment of its founder, the ultimate crypto bro Sam Bankman-Fried. Known as “SBF,” this mini Madoff stole his customer’s digital assets from the exchange so he could gamble in his failed side-hustle of a crypto hedge fund.
If there was no there there in digital currency, you would think the FTX demise would mark the ultimate denouement of this asset class, but it didn’t happen. Plus, approving an ETF to be traded on the Nasdaq or New York Stock Exchange is probably the best way for Gary and his peeps to keep an eye on things and keep investors far away from future Bankman-Frieds.
The biggest reason, I suspect: Gary Gensler is no match for Larry Fink. If you didn’t notice BlackRock, the world’s largest money manager, is one of the 11 firms offering the new ETFs. Fink, BlackRock’s founder and CEO, was once a crypto skeptic like Gensler. He is no longer. Over time he came to see crypto as “a store of value” rivaling the long-held status of gold.
Yes, those are his words.
In my words, Fink sees a decent money-making opportunity. Normalizing Bitcoin through an ETF could at some point normalize it as an asset class with financial advisers. Once that happens, if the typical weighted portfolio of stock and bonds also includes some crypto, BlackRock’s ETFs will get first dibs since it has such tight relationships with the big brokerage firms.
Once Fink was all-in on the Bitcoin ETF, the pressure on Gensler became enormous. Fink has become a political lightning rod in recent years for his support of ESG (environmental, social and governance) investing.
His critics forget what got him here; he built the world’s biggest asset manager starting from zero 30-plus years ago into a $10 trillion business, and he has connections all over DC and in both parties. (He was Donald Trump’s money manager). Moreover, he has the people Gensler reports to in the Biden White House on speed dial.
About a month ago, I reported that Shari Redstone was desperately looking to unload her ailing media empire, Paramount Global. She would do that by selling not the entire company, but her stake in National Amusements, the controlling shareholder.
Interested buyers included RedBird Capital and Skydance Media, owned by David Ellison, son of Oracle founder Larry Ellison. They had all signed NDAs. Shari was looking to preserve family wealth for future generations (National Amusements was the brainchild of her late dad, media mogul Sumner Redstone) as the legacy media business slowly collapses. She was hoping to get about $2 billion and move on with life.
What’s different today? Lots of reports that she’s shopping her stake and interested parties signed NDAs. Sorry fellas, that isn’t really news; what is news is the story of why it’s so hard to find a buyer for legacy media assets these days.