U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler testifies before a Senate Banking, Housing, and Urban Affairs Committee oversight hearing on the SEC on Capitol Hill in Washington, U.S., September 14, 2021.
Evelyn Hockstein | Reuters
WASHINGTON — Securities and Exchange Commission Chairman Gary Gensler faced a barrage of criticism from House Republicans on Tuesday over his agency’s crackdown on cryptocurrency trading platforms.
In greater than 4 hours of testimony before the House Financial Services Committee, Gensler stood firm on his view that crypto trading platforms and exchanges should abide by strict U.S. securities laws.
“All of those corporations should come into compliance with the law, and until they do, we are going to proceed to pursue them because the cop on the beat, and investigate and follow the facts and law,” Gensler told the panel.
Republicans raised most of the points the crypto industry usually makes about regulation, arguing that the SEC’s disclosure rules were designed to manage traditional markets, and so they are in poor health suited to decentralized digital currency exchanges.
Without laws from Congress that creates a recent regulatory framework specifically for crypto, the businesses argue, digital platforms will move overseas to avoid running afoul of U.S. regulators.
This might weaken America’s status as a hub for cryptocurrency innovation, they argue, and potentially cede that position to U.S. adversaries.
“Your approach is driving innovation overseas and endangering American competitiveness,” committee chairman Rep. Patrick McHenry, R-N.C., told Gensler initially of the hearing.
“Regulation by enforcement will not be sufficient nor sustainable,” said McHenry. “You are punishing digital asset firms for allegedly not adhering to the law when they do not know it should apply to them.”
Gensler, nevertheless, rejected the notion that crypto trading platforms do not know easy methods to interpret U.S. securities laws.
“We have now an entire field in crypto that understands the law, and in the event that they are providing exchange services, broker dealer services, clearing services of crypto security tokens, they need to come into compliance,” Gensler said in response to an analogous point later within the hearing.
Throughout his testimony, Gensler declined to debate the specifics of its investigation into the collapse of FTX, and more recently, its notice to Coinbase last month that the crypto exchange is under investigation.
The SEC has ramped up its enforcement of the crypto industry, bearing down on corporations and projects that it alleges are hawking unregistered securities. Reports first surfaced of an SEC probe into Coinbase in mid-2022.
Facing the House committee on Tuesday, Gensler showed little sympathy for the challenges faced by crypto exchanges operating within the U.S.
“We have now a transparent regulatory framework built up over 90 years,” he said. The exchanges are “only a bunch of intermediaries on this market that think they’ve a selection. They do not have a selection. They’re noncompliant generally, and so they need to come back into compliance,” he added.
The prospect of laws to manage digital currencies has faded this yr, drummed out by the showdown over the debt ceiling and the House Republican majority’s give attention to issues like energy and countering the multi-pronged threat from China.
Nonetheless, major crypto industry groups are planning to spend tens of millions of dollars this yr to lobby Congress and the Biden administration.
