During his appearance before the U.S. House of Representatives, the SEC Chair Gary Gensler faced criticism over the agency’s stance on cryptocurrencies. In particular, on issues such as recognizing Ethereum as a security, regulating stablecoins, and the situation surrounding FTX.
At a request to clarify the status of the second-largest cryptocurrency, Gensler reiterated his statements about the large number of digital-asset projects that violate securities laws. He added that the agency is in talks with teams about registering tokens.
In response to a clarifying question as to whether Ethereum is a security, Gensler noted that U.S. regulations clearly regulate it, requiring disclosure to investors, and the Commission enforces compliance.
“The securities laws have indeed stood the test of time. This is an area where there is clarity, and it is a mistake to try to ignore it,”— уточнил to reporters.
Gensler backed the recommendations of the President’s Working Group on Financial Markets regarding stablecoins. The SEC chair agreed to the adoption of the corresponding bill with the caveat “if this does not undermine capital markets worth $100 trillion”.
The regulator’s chief faced criticism for a lack of proactive steps to prevent the FTX collapse, linked to the practice of commingling customer funds with assets of the affiliate exchange Alameda Research, and for problems with keeping records.
“If these companies had registered, we would have been able to examine their books and reports,” — Gensler parried.
House Republican Leader Tom Emmer shouted at the SEC chair, accusing him of deliberately pushing the crypto industry out of the United States “into the arms of the Chinese Communist Party.”
“During your tenure at the SEC, how many rules has the regulator refined that actually align with the existing regulatory framework and are designed specifically for the digital assets industry? The answer is zero. You were an incompetent policeman on the job!” — Emmer attacked.
In response, the agency head said that attempts were being made to bring products offered by the industry into compliance with the law.
Gensler also faced criticism from Democrats, who said they were dissatisfied with the lack of priority given to enforcement against offshore firms like Binance and Tether that serve U.S. residents.
New York representative Richie Torres accused the SEC chair of failing to draw lessons from the FTX collapse, pointing to investigations into American firms [Coinbase and others].
Gensler acknowledged that offshore firms may illegally do business with U.S. customers and that the Commission has jurisdiction in these cases.
“Gathering material for investigations takes longer, in part due to coordination with overseas colleagues. […] Frankly, it is not easy to secure actual enforcement of subpoenas,” — he lamented.
Ahead of the hearing, lawmakers published an open letter criticizing the SEC for the absence of clear rules for crypto companies.
“Without clear rules of the game, your demand that firms “come and register” is a willful distortion of a non-existent registration process. The only one to blame is the Commission itself,” — is stated in the document.
The letter accuses Gensler and the SEC of imposing a regulatory framework on the digital assets ecosystem that is also incompatible and inapplicable. Lawmakers argue that “the activity of firms is not related to the sale of securities.”
In 2023 the Commission noted violations in the operations of Bittrex, Coinbase, Kraken, Gemini and Genesis.
In March, Gensler suggested that tokens on the Proof-of-Stake consensus algorithm could be deemed securities under U.S. law.
A month earlier, the agency head hinted at the possibility of classifying all cryptocurrencies, with the exception of Bitcoin, in this status. His stance was criticised by industry lawyers.
Earlier, Gensler called the crypto market centralized. He urged platforms to approach the SEC about recognizing a given asset as an investment contract. He also warned of possible prosecution of unregistered Bitcoin exchanges.
Ohio Republican Warren Davidson pledged to introduce a bill that wouldremove Gary Gensler from the post of SEC chair.