Caitlin Long on Historic SEC Hearing in Congress & Gary Gensler's Future

For the first time in five years, every single Commissioner at the Securities and Exchange Commission appeared before Congress to testify Tuesday.

It quickly became apparent that the hours-long hearing would be used as a bipartisan rebuke of the way Chair Gary Gensler has warped his agency into a tool to attack crypto company after crypto company.

For Custodia Bank founder Caitlin Long, the hearing was more than just political theater — it was an eye-opening look at what she describes as Gensler’s “hypocrisy.”

Long, a frequent critic of the SEC’s handling of crypto, said the hearing exposed the division within the SEC itself and showcased just how out of step Gensler is with the rest of the commission. “Fireworks and hypocrisy,” she said, reflecting on the bipartisan criticism directed at Gensler. Even some Democratic lawmakers, who have traditionally supported his agenda, openly challenged his enforcement-first approach.

One of the most striking moments, as Long pointed out, came from Majority Whip Tom Emmer. Known for his pro-crypto stance, Emmer labeled Gensler's leadership as "destructive and lawless," accusing the SEC chair of stifling innovation through his inconsistent application of securities laws. Emmer’s sharp critique resonated with Long, who has long viewed Gensler's strategy as not only counterproductive but also harmful to the very investors the SEC is supposed to protect. "From Gensler’s perspective, he probably thinks he had a great reign," Long said. "But the rest of us look at it and see an agency that’s had its wings clipped by the courts."

For Long, the real issue lies in Gensler’s overarching goal: the implementation of a central bank digital currency (CBDC), something Senator Elizabeth Warren has been vocal about supporting. Long argues that much of Gensler’s focus has been on blocking the crypto industry's progress to clear the way for a CBDC.

"He looks at it as throwing sand in the wheels of all these upstarts to slow them down," Long explained. "But he’s ignoring the collateral damage — investors are being harmed, not protected." According to Long, this is evident in the SEC’s failure to act against bad actors like FTX, BlockFi, and Celsius, while targeting companies trying to comply with existing regulations.

One of the most troubling aspects of Gensler’s tenure, Long pointed out, is the double standard when it comes to enforcement. She referenced the recent news that Bank of New York Mellon was granted permission to custody crypto, an allowance not extended to smaller, more innovative companies.

“They blocked out all the upstarts, created a rule to try to slow down the industry, and then turned around and gave big banks special exceptions.”

Long sees this as a deeply corporatist move, one that runs counter to the progressive values Gensler and Warren claim to uphold. “How can they possibly call themselves progressives when they’re handing all the advantages to the big banks while stifling innovation from the little guys?” she asked.

The hearing also highlighted the growing divide within the Democratic Party, especially regarding financial regulation and crypto. Long noted that while there is strong support for CBDCs among progressives like Warren, there is also significant pushback from pro-business Democrats. Long pointed to the recent vote by former Speaker Nancy Pelosi to overturn SAB 121 — a rule that has made it difficult for companies to hold digital assets on their balance sheets — as evidence of this growing rift. "You’re starting to see the more pro-business Democrats push back against this corporatist agenda," she said. "It’s a war between the progressives and the pro-business wing."

Looking ahead, Long remains cautiously optimistic that there may be change on the horizon, particularly with the 2024 presidential election looming. While it’s uncertain whether Vice President Kamala Harris, should she succeed President Biden, would take a different approach. Long has heard rumblings that the Harris campaign has promised bankers that Gensler and other key financial regulators would be replaced. "It makes sense," Long said. "The pro-business wing of the Democratic Party is pushing back hard against the progressives, and they see the hypocrisy in all of this."

However, Long is not entirely convinced that a change in administration would solve the problems plaguing the SEC. Even if there is a turnover in leadership, the entrenched career staff at the SEC and other agencies could continue to push the same agenda.

"It’s not just about the political appointees," she said. "The career staff are the ones who carry out these policies, and unless there’s a real housecleaning, nothing will change." Long believes that any incoming administration, whether Democratic or Republican, will need to overhaul not just the leadership but also the senior staff within these agencies if they hope to foster a regulatory environment that encourages innovation while protecting investors.

Despite the challenges, Long and Custodia Bank have survived what she describes as a coordinated effort by federal regulators to kill off crypto banks. She mentioned the recent revelations about Silvergate Bank, which had survived a bank run only to be "suicided" by the Federal Reserve. "Of the five crypto banks that got targeted by Operation Choke Point, only one survived as an operating bank, and that’s Custodia," she said.

While Long acknowledges that Custodia is wounded by the regulatory onslaught, she remains committed to fighting for a fair and transparent regulatory framework for the crypto industry. "We survived, and we’ll keep fighting," she said.

As the crypto industry braces for what could be a pivotal year in 2024, Long remains focused on the long game.

"Bitcoin doesn’t care about U.S. politics," she said. "It keeps on adding blocks, and we keep on building." With the prospect of more hearings, potential legislation, and perhaps a new administration, Long believes that the industry is at a crossroads. "The fight isn’t over, but I think we’re getting closer to a turning point," she concluded. "And when we get there, it’s going to be a better world for everyone in crypto."

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