House Republicans took aim at the nation’s top markets regulator Tuesday for its oversight of the digital asset industry, arguing that Securities and Exchange Commission Chairman Gary Gensler has been both overly aggressive in bringing enforcement actions against the industry while refusing to clearly state which tokens he sees as under its jurisdiction.
“You’ve refused to provide clarity on whether digital assets…are subject to securities laws and more importantly, how these firms should comply with these laws,” said Rep. Patrick McHenry of North Carolina, the Republican chairman of the House Financial Services Committee, during an oversight hearing.
See also: Gensler slams digital-asset industry for ‘ignoring the law’ as crypto crackdown continues
McHenry tried to get Gensler to state whether ether ETHUSD, -5.20%, the second largest cryptocurrency by market capitalization, was a security, but he declined to go into specifics on any particular digital token.
Financial products that are securities must follow SEC disclosure rules and can only be sold to the public by entities registered at the SEC, and the agency has ramped up its enforcement actions against both crypto issuers and intermediaries for failing to register.
The digital asset industry and its allies in Congress have argued that differences between cryptocurrencies and traditional securities makes it impossible for issuers and intermediaries to comply with SEC rules.
Republicans also took aim at Gensler for failing to stop failures in the industry, like the collapse of crypto exchange FTX, which was the world’s second largest at the time of its failure.
“Existing SEC rules make no sense for blockchain-based companies and following them would actually kill these businesses,” said GOP Rep. Tom Emmer of Minnesota said. “Your regulatory style lacks flexibility and nuance and as a result, you’ve been an incompetent cop on the beat, doing nothing to protect everyday Americans.”
Gensler has argued that the securities laws already clearly outline when a financial instrument is a security, and that most digital assets are securities because the public are buying them, expecting them to increase in value because of the joint efforts of a group of entrepreneurs.
He defended the SEC’s record of enforcement against the digital asset industry, arguing that he has aired his concerns about the dangers posed by unregistered crypto intermediaries long before FTX’s collapse.
“I’ve been very clear with many members of this industry that right now they need to come into compliance,” he said.
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