The hearing came under fire that the SEC chairman himself did not know the properties of cryptocurrencies

2023-04-19 10:14

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Gensler declined to specify whether Ethereum is a commodity or a security

Headline: Under Fire from Republicans, What SEC Chairman Said at House Hearing

原文作者： Mary Liu，比推 BitpushNews

On April 18 local time, the Securities and Exchange Commission (SEC) Chairman Gary Gensler attendedHouse Financial Services CommitteeHearings for the agency's radicalizationsupervisionIn his defense, it was Gensler's first appearance before the panel since October 2021 and his first hearing before the Republican-controlled House Financial Services Committee.

Background: The industry complained, and Republican lawmakers moved to oust Gensler

Since last yearFTXSince the trading platform collapse, the SEC under Gensler has dramatically stepped up enforcement against the crypto industry and has specifically targeted top players in the industry, such as toCoinbaseWells filed a Wells notice against Justin Sun, founder of Tron, the Tron Foundation, BitTorrent Foundation, and others associated with him.

The actions have drawn criticism from Republicans, and Senator Warren Davidson has introduced new legislation that would remove Gensler and replace him with an SEC executive director. Chairman of the House Financial Services CommitteePatrick McHenryIn his tweet, he said the SEC's crackdown on cryptocurrencies had failed to bring stability to digital asset markets, writing: "Your approach is driving innovation overseas and jeopardizing U.S. competitiveness."

U.S. business groups are also pushing back against the SEC's aggressive regulation. Tom Quaadman, executive vice president of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness, recently wrote to the House Financial Services Committee. "The bulk of the SEC's rulemaking is unprecedented and deserves close congressional scrutiny," the group said.

Ahead of the hearing, a panel of Republican lawmakers sent an open letter to Gensler slamming the SEC's regulation of digital assets, particularly objicating Gensler's repeated calls for cryptocurrency trading platforms to register with the agency.

"Your failure to provide a pathway to allow digital asset trading platforms to register, and without clear rules of the road, your push for companies to 'come in and register' is a willful misrepresentation of the SEC's nonexistent registration process," the lawmakers wrote. "The only entity responsible for the lack of registrants is the SEC itself."

Gensler: Most crypto tokens are securities

Gensler brushed aside criticism from Republican lawmakers, saying in written testimony to the House Financial Services Committee, "... Given that most crypto tokens are securities, many crypto intermediaries are trading securities and must be registered with the SEC."

Representative Josh Gottheimer said at the hearing that the specific guidance the SEC has provided to digital asset companies looking to comply is very "limited." Gottheimer said: "Under your leadership, the SEC has primarily used enforcement actions to promote compliance, and I am concerned that the lack of formal guidance in the normal rulemaking process creates more uncertainty in this area." Gensler responded that the SEC has given more formal definitions and updates and will soon issue these new measures.

Gensler said: "Over the past two years, we have filed nearly 1,500 enforcement actions and conducted more than 6,000 checks on registrants. We have engaged with more than 40,000 registrants - asset managers, brokers, dealers, trading platforms, integrated fund providers, listed companies and more, and dedicated institutional staff have done an excellent job with limited resources."

Gensler declined to specify whether Ethereum is a commodity or a security

At the hearing, SEC Chairman Gary Gensler was asked several times by Patrick McHenry, chairman of the House Financial Services Committee, whether Ethereum is a commodity or a security. Gensler repeatedly refused to give a clear answer, The reason is that the SEC is not in a position to comment on the 'facts and circumstances' of specific cases.

When asked if Ripple's Token XRP is a security, Gensler responded that the case is currently on trial.

McHenry also suggested that the SEC and the Commodity Futures Trading Commission,CFTCRostin Behnam, chairman of the CFTC, which regulates derivatives, has said Ethereum falls under the agency's jurisdiction. New York Attorney General Letitia James called Ethereum an unregistered security in an enforcement action against cryptographic firm KuCoin. As a result, there is still no consensus at the federal level on whether Ethereum is a security or a commodity.

The SEC has not ruled out taking action against companies that have left the case

Several Republicans at the hearing cited the SEC's handling of Silvergate's most prominent client, FTX. McHenry recently sent a letter to Gensler asking for more information about the SEC's charges against Sam Bankman-Fried, and Gensler said on Tuesday he had an obligation to keep matters of the investigation confidential.

Asked by New York Rep. Ritchie Torres why the SEC chose not to take action against other offshore companies like Binance (especially after the FTX failure), Gensler said the agency is committed to taking appropriate action against any company that interacts with U.S. investors, Even if the offshore companies are not registered in the United States.

Gensler argued that offshore companies may be illegally doing business with U.S. clients and that the SEC has jurisdiction over those cases. Gensler said: "It takes longer to build the investigation file. Working with offshore enforcement agencies sometimes takes longer and, frankly, it is challenging to get foreign companies to comply with subpoenas if they are involved ".

Representative Tom Emmer, a prominent cryptocurrency ally, asked Gensler: "Are you concerned that your approach to the digital asset industry is actually driving the industry out of the United States?" Gensler responded: "I'm trying to push it to be compliant. If they don't comply with the law, then they shouldn't be offering products to American investors. If they comply with the law and do the right thing for investors, they can be here."

Stablecoins, encryptionbankproblem

Stablecoin regulation is also at the heart of the jurisdictional battle between the SEC and CFTC. CFTC Chairman Behnam said last month that Stablecoins fall under the CFTC's purview until Congress and the Biden administration produce a new comprehensive regulatory framework. The U.S. Securities and Exchange Commission has also claimed jurisdiction over these assets, and Gensler signed off on an executive proposal in 2021 to create the framework.

At the hearing, Republican lawmaker French Hill asked Gensler if he would like to see a law enacted around Stablecoin. Gensler gave a qualified yes, but warned against "disrupting the $100 trillion capital market," he said. Supports stablecoin legislation proposed by a panel of regulators led by Treasury Secretary Janet Yellen.

During the hearing, Gensler also tried to link the recent failures of Silicon Valley Bank and Signature Bank to their work with clients in the digital assets industry, noting that Circle holds $3 billion in USDC reserves at Silicon Valley Bank.

At the hearing, Democratic lawmakers led by ranking member Maxine Waters (D-Calif.) defended Gensler's digital assets strategy, with Waters arguing that his approach was "radically different" from that of previous SEC officials.

The SEC has been stepping up enforcement against encryption companies in recent months. Its latest action, as previously reported, accuses Seattle-based trading platform Bittrex of failing to comply with securities laws by failing to register with financial regulators in multiple areas. It claims that the leading cryptocurrencies Dash, Algorand, have securities-like characteristics. Speaking at the Innovative Finance Global Summit on the day of the hearing, Coinbase CEO Brian Armstrong said that with crypto regulation in the U.S. still unclear, "everything is' on the table, 'including moving out of the U.S." The Telegraph reports that Coinbase is considering a move to the U.K., noting that the country is Coinbase's second-largest market.

U.S. blockchain developers are seeing their market share shrink, according to a report released last month by venture Capital firm Electric Capital, which cited "clear and supportive regulations" for the crypto industry as key to attracting such professionals to the United States in the future.