Members of the U.S. Congress grilled the Securities and Exchange Commission (SEC) Chairman Gary Gensler for missteps in the agency’s handling of digital assets. The SEC chair was admonished for the lack of clarity in regulating the crypto space. This hostile treatment of digital assets has resulted in the flight of capital from the country and the exclusion of small retail investors.
The SEC has been at the forefront of the war against digital assets. It has sent several wells notices and filed cases against crypto companies. The cases are usually regarding companies offering unregistered securities to investors. Some of the top projects targeted are Ripple’s XRP and Paxos’ BUSD.
Gensler Taught Crypto Yet Can’t Answer Simple Questions
Financial Services Chair, Rep. Patrick McHenry, asked the SEC chairman a simple question. Gensler was asked if Ethereum (ETH) is a commodity or security, but the SEC head just gave a vague answer. This is an important question since ETH is the second largest crypto by market cap, and its classification will set the tone for a majority of digital assets. Gensler refusal to give a straight and clear answer is indicative of how the SEC is handling the crypto industry.
Rep. McHenry rephrased his question and asked if the Commodities Futures Trading Commission (CFTC) and the SEC’s opposing views to classify an object protect consumers and innovation. Instead of a simple yes or no, Gensler chose to give another unclear answer. This is a disappointing reply from somebody who was once a blockchain lecturer. Watch a portion of the hearing below.
Failure of Gensler to Protect Investors Questioned
Warren Davidson, a representative from Ohio’s 8th district, did not mince words when he laid down the failures and abuses of the SEC. He cited some abuses the agency has committed to exercising its power. He said that the SEC has a “Hotel California” rule, a reference to a famous song by the band Eagles. The “Hotel California” rule refers to a situation where a cryptocurrency is classified as a security by the SEC and cannot be sold or traded without being registered with the agency.
Rep. Davidson also highlighted the SEC’s de facto ban on crypto through the proposed custody rule. This proposal would require investment advisers to secure all the client assets that they manage, including cryptocurrencies, in a third-party custodian
He called for the restructuring of the agency and wants to remove the SEC chairmanship and instead replace the position with an executive director who reports to the Board, where all authority resides. Gensler will automatically be disqualified because the proposed legislation will ban former SEC Chairs from becoming executive directors.
Crypto is a Choice
The SEC is said to be just doing its job of protecting investors. This is a just and fair mission, but is it possible that those in authority are abusing their powers? Gary Gensler was once celebrated by the crypto community because he once taught about blockchain technology at the prestigious Massachusetts Institute of Technology (MIT). His appointment as SEC chair was taught to be a golden opportunity for the digital assets industry, but the opposite happened. His moves are now seen as a regulatory overreach by many in the crypto space.
Fortunately, there are members of Congress who are noticing that hostile actions against digital assets are producing negative results. Capital and Innovative entrepreneurs are now looking for friendlier jurisdictions. Retail Investors are also being left out. Rep. Davidson nailed it when he said that excluding retail investors in the guise of consumer protection is not acceptable.
You can’t just exclude retail investors from markets and claim it’s for their own good@WarrenDavidson, April 2023
Crypto is a choice. There is nobody forcing anybody to adopt it because the technology speaks for itself. It is a technological innovation that brings transparency and security while providing faster and cheaper transactions. Authorities should encourage education instead of blind persecution. The freedom to choose should not be denied because doing so constitutes abuse.
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