Lawmakers from both major parties in the House of Representatives on Tuesday intensified their criticisms of the U.S. Securities and Exchange Commission (SEC) regarding its policies on cryptocurrencies. They accused the agency of stifling the industry’s growth.
This heated questioning occurred amid increasing election-year political pressure and significant campaign contributions from the crypto industry, which SEC Chair Gary Gensler has described as rife with criminality and non-compliance, leading to substantial investor losses.
All five SEC members attended the hearing of the U.S. House Financial Services Committee, marking only the third time in 17 years that this has happened. This allowed Republican commissioners to express dissent alongside the majority Democratic members.
Committee Chairman Patrick McHenry, a Republican, stated that the SEC had referred to digital assets using various terms, leaving the crypto industry confused about which assets fell under SEC jurisdiction.
Gensler responded that the distinction was “less about the terms. It’s more about the economics,” referring to Supreme Court precedent on defining securities as investment contracts.
However, Republican Commissioner Hester Peirce, a vocal critic of Gensler’s approach, argued that the agency had “taken a legally imprecise view to mask the regulatory lack of clarity.” This uncertainty raised questions about whether an asset was a security or part of an investment contract, affecting sales.
Since taking office, Gensler has maintained that existing securities laws are adequate for regulating the crypto industry and has dismissed calls for specific regulations.
He also defended a 2022 SEC accounting bulletin that lawmakers sought to rescind, which requires public companies safeguarding crypto assets to record them as balance sheet liabilities. Gensler stated that a series of bankruptcies justified this practice.
Additionally, he mentioned that depending on the outcome of November’s elections, the SEC might attempt to issue regulations regarding corporate disclosures about share buybacks, following a court decision that struck down a previous SEC rule.