Republicans condemn the SEC chairman over the cryptocurrency lawsuits

Gary Gensler, the chair of the Securities and Exchange Commission (SEC), testified before the House Financial Services Committee on Tuesday and responded to inquiries regarding a range of subjects, including the organization’s recent crackdown on cryptocurrency businesses.

The SEC chairman began his prepared remarks by restating his position that “the great majority of crypto tokens are securities.”

Republicans on the committee claimed in a letter that the national securities exchange’s criteria are inappropriate for digital assets.

Gensler’s repeated requests for companies to “come in and register,” according to the letter, constitute a “willful misrepresentation” of his organization’s policies.

Financial Services Committee Patrick McHenry (R-N.C.) warned Gensler on Tuesday that the SEC’s method of market regulation was “nonsensical” and that it was “pushing innovation abroad and harming American competitiveness.”

With the stunning collapse of the FTX exchange last year, Gensler has considerably ramped up SEC enforcement. Gensler has his eyes set on some of the biggest businesses, including Coinbase. Crypto lobbyists have been urging politicians to adopt a more aggressive strategy.

As many of the items are made up of unregistered securities, Gensler has long contended that a large portion of the lightly regulated $1 trillion industry violates American securities laws.

Since the GOP seized control of the House in January, Gensler, a supporter of prominent progressives like Sen. Elizabeth Warren (D-Mass.) and Senate Banking Chair Sherrod Brown (D-Ohio), has conflicted with McHenry. The experienced regulator’s accelerated regulation agenda includes plans to revamp the private equity sector and stock market trading, as well as a comprehensive proposal for climate disclosure that Republicans have attacked with charges of overreach by the government.

Throughout the five-and-a-half-hour crypto hearing on Tuesday, McHenry criticized Gensler’s approach to regulation along with other Republicans including Reps. French Hill of Arkansas and William Huizenga of Michigan. They complained that he spent too much time enforcing the law and not enough time educating the business community. They also criticized the SEC chair for resisting their requests to look into his response to the FTX disaster; McHenry dubbed the agency’s replies “awful.”

“We will be forced to explore all options to compel the information or records we require,” McHenry stated, “if you continue to frustrate this institution by disregarding our requests and delivering insufficient replies.”

In one heated discussion, McHenry pressed Gensler to clarify whether Ether, the second-largest cryptocurrency token after Bitcoin, is security, alluding to a future turf battle between the SEC and another regulator, the Commodities Futures Trading Commission. Ether is covered under the CFTC’s authority, according to CFTC Chair Rostin Behnam, whose organization regulates derivatives goods.

“Do you believe it benefits the market for an item to be viewed as a security by the securities regulator and a commodity by the commodities regulator? What about the items’ safety and soundness do you believe that provides? McHenry questioned Gensler, who oversaw the CFTC under the Obama presidency. “I believe the answer here should be a very simple no.”

Gensler, however, refrained and cited a long-standing SEC policy that prohibits officials from commenting on particular instances. Instead, he gave a brief explanation of the SEC’s criteria for deciding whether an item qualifies as a security.

Exchanges, brokers, and issuers were urged by the SEC chair to follow the same regulations as Wall Street.

It’s not a problem of clarity, he insisted. The majority of this field’s foundations revolve around non-compliance.

Republicans had a rare chance to confront Gensler during the hearing as opposed to through official statements and public letters.

Although Gensler frequently jumped to defend the SEC’s efforts, the displeasure was clear.