Tuesday, 30 May 2023

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What the Gensler hearing means for US crypto regulation and policy

What the Gensler hearing means for US crypto regulation and policy

Gary Gensler, the United States Securities Exchange Commission (SEC) chair, recently appeared before the U.S. House of Representatives Financial Services Committee for a hearing regarding his leadership of the regulatory agency. 

The hearing, with Gensler as the only witness, promised to be unpleasant for the SEC chair, with the federal agency’s actions during Gensler’s leadership since spring 2021 coming under scrutiny.

From the introduction by the committee chair, Representative Patrick McHenry, Gensler was under fire for the SEC’s perceived overreach and approach of regulation through enforcement.

McHenry stressed that the absence of a clear position on the legal classification of cryptocurrencies doesn’t make it easier for companies to comply with the SEC’s demands.

A day before the hearing, Representative Warren Davidson announced a measure to fire the SEC boss and cut the power of his successors “to correct a long series of abuses” against the crypto industry.

As threatening as it may sound, this was not the first and will likely not be the last attack on Gensler. The SEC chair has made himself several enemies during his two years in the top job — and not just in the crypto industry.

But hyperbole and congressional saber-rattling aside, was the April 18 hearing that bad for the SEC chair, and could it soften his position on crypto?

Grilling and cheering

The fiery opening statement by McHenry was inspired by the SEC’s impressive record of 50 separate enforcement actions against digital asset firms and the agency’s request for an additional $78 million of funds to expand its activity.

McHenry blamed Gensler for the “nonsensical” punishment of crypto companies, which failed to comply with the laws they didn’t know even applied to them, with “not sufficient, nor sustainable” regulation by enforcement and “overly aggressive” rulemaking.

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In his prepared testimony, Gensler debunked the reprimands about rushed rulemaking, citing the standard procedures (the length of comment periods for the SEC propositions currently averages more than 70 days) and the necessity to meet the urgent challenges of the time, digitalization being chief among them.

Speaking of crypto, Gensler once again reinstated his position that “most crypto tokens are securities” and should be regulated by the SEC. In his opinion, the market is “rife with incompliance” and, in…

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