Wall Street Watchdog Faces Bipartisan Criticism in House Over Crypto, According to Reuters

By Douglas Gillison

Lawmakers from both major parties in the House of Representatives have intensified their criticism of the U.S. Securities and Exchange Commission (SEC) regarding its approach to cryptocurrencies, claiming the agency is stifling the growth of the industry.

This heated exchange comes amid increasing political pressure as elections approach and a surge in campaign contributions from the cryptocurrency sector. SEC Chair Gary Gensler has previously characterized the industry as plagued by criminal activity and regulatory non-compliance, which he argues leads to significant losses for investors.

During a hearing before the U.S. House Financial Services Committee, all five SEC commissioners appeared together, marking only the third occasion in the last 17 years of such an event. This rare gathering allowed Republican members to express their dissent alongside their Democratic counterparts.

Senior Republican lawmakers, supported by some Democratic voices, voiced their frustration about the SEC’s inconsistent terminology regarding digital assets. Committee Chairman Patrick McHenry noted that the various terms used by the SEC have left the cryptocurrency sector uncertain about which assets fall under its regulatory authority.

Gensler responded by stating that the issue is “less about the terms” and more about the economic nature of the assets, referencing Supreme Court precedents on securities as investment contracts.

However, Commissioner Hester Peirce, an outspoken critic of Gensler’s strategies, claimed the agency’s vague interpretation has obscured regulatory clarity, leading to confusion over whether an asset qualifies as a security or is associated with an investment contract, thereby impacting market transactions.

Since assuming his role, Gensler has maintained that existing securities laws are adequate to regulate the crypto industry, dismissing suggestions for specific regulations tailored to this sector.

Furthermore, Gensler defended a 2022 SEC accounting bulletin that lawmakers attempted to repeal in May, which requires public companies holding cryptocurrency assets to account for them as liabilities on their balance sheets. He argued that the numerous bankruptcies in the industry validated this requirement.

Gensler also mentioned that depending on the results of the upcoming elections in November, the SEC may revisit regulations related to corporate disclosures about share buybacks, following a recent court ruling that invalidated a rule established last year.