All five members of the U.S. Securities and Exchange Commission (SEC), including the crypto-skeptic chair Gary Gensler, testified at a congressional hearing where the agency was criticized for its aggressive regulatory approach.
Gary Gensler, the chair of the SEC, along with commissioners Hester Peirce, Mark Uyeda, Caroline Crenshaw, and Jamie Lizárraga, appeared before the U.S. House Financial Services Committee to discuss oversight of cryptocurrencies for the first time since 2019.
Lawmakers criticized the SEC and Chair Gary Gensler for their aggressive enforcement actions towards digital assets. Critics argue that Gensler and the SEC have burdened the industry with policy uncertainty.
Gensler, who often asserts that most cryptocurrencies are securities, and Commissioner Peirce, who regularly disagrees, were specifically questioned about the SEC’s unclear language regarding blockchain-based virtual currencies like Ethereum (ETH).
Peirce stated that the agency has failed to provide regulatory clarity for cryptocurrencies despite having the tools to do so. She argued that using ambiguous language, such as suggesting that crypto tokens are inherently securities, has made it more difficult for the agency to oversee the markets.
Representative French Hill supported Peirce’s views, adding that the SEC has been “front-running Congress on crypto regulation” and has attempted to take control of crypto oversight through broad enforcement actions. Hill and Peirce emphasized the need for statutory assistance from Congress to establish a comprehensive regulatory framework, especially since the SEC has avoided rulemaking.
Rep. Tom Emmer criticized Chair Gensler for creating terms like “crypto asset security.” The agency recently retracted this term and pledged not to use it in future litigations.
Ranking member Maxine Waters urged Chair Patrick McHenry to continue negotiations on stablecoin policies before his retirement in early 2025. Waters and McHenry have been discussing regulations for fiat-pegged tokens for months, and experts believe that such a bill could transform the global digital economy.
The hearing, titled “Oversight of the Securities and Exchange Commission,” took place shortly after the Financial Services Committee’s meeting on the SEC’s approach to digital assets. The SEC and Gensler faced criticism from legislators and private advisors during that meeting as well.
Dan Gallagher, a former SEC commissioner and Robinhood’s Chief Legal Officer, testified at the congressional hearing and echoed the sentiment that only Congress can resolve the SEC’s failure to provide regulatory clarity for cryptocurrencies.
Before the meeting, Republican lawmakers led by Committee Chair Patrick McHenry demanded that the SEC, Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency revoke Staff Accounting Bulletin 121. Staff bulletins like SAB 121 are not official SEC interpretations, according to the agency’s website. However, the SEC staff has apparently held closed-door meetings with select companies and granted exemptions based on SAB 121.
The crypto industry criticized the SEC for unfairly favoring certain companies in the digital asset custody market. It is unclear whether the Bank of New York Mellon, the largest custodial bank in the U.S., received its SAB 121 exemption through one of these meetings.
In addition to the GOP letter, Republican politicians had previously questioned Gensler and the SEC about potential political bias in employee recruitment and promotions. Gensler was scheduled to testify again before the Senate Banking Committee, but the meeting was postponed.
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