Coinbase CLO is challenging SEC’s crypto asset security term before a critical House Financial Services Committee hearing.
The SEC’s terminology of “crypto asset security,” which is being used more frequently by the regulatory agency, has been challenged by Coinbase and Ripple CLO. His criticism is delivered at a time when the SEC is facing criticism for coining this term, even though there is no law in the United States that endorses it.
The issue has garnered significant attention, particularly in light of the fact that the House Financial Services Committee anticipates that Gary Gensler, the SEC Chair, and all five SEC Commissioners will participate in a hearing.
Coinbase CLO Questions The Securities and Exchange Commission’s Utilization of “Crypto Asset Security
Grewal commented on X that the term “crypto asset security” is not well-established or uniform in the SEC enforcement measures. The Coinbase CLO also observed that the SEC has been inconsistent in its treatment of tokens as securities and as investment contracts in various legal contexts.
These allegations are made in response to the concerns raised by Rep. Ritchie Torres, a New York Congressman, during a congressional hearing earlier this month. Torres also questioned the SEC’s terminology.
The absence of the terms “digital asset security” or “crypto asset security” in any law, regulation, or Supreme Court judgment further exacerbates the criticism from blockchain advocates and legislators. Daniel Gallagher, Robinhood’s Chief Legal Officer, has also expressed his belief that the SEC invented the term without any statutory support.
Ripple’s legal officer Joins in the criticism
Stuart Alderoty, the Ripple CLO, expressed sentiments comparable to those of the Coinbase CLO, asserting that the SEC is exploiting the terminology employed in the court. Alderoty observed that the SEC’s persistent use of the term “crypto asset security” in legal documents has sparked criticism.
For example, the Securities and Exchange Commission (SEC) recently issued an apology for employing the term in the complaint against Binance, recognizing that it was misleading.
Ripple is currently embroiled in a legal dispute with the Securities and Exchange Commission (SEC) regarding the classification of XRP as a security. This critique arrives at this time. Alderoty contended that the SEC’s ability to be persuasive in court is being undermined by its inconsistencies.
Before Congressional testimony, the SEC is being scrutinized
The House Financial Services Committee will hear testimony from all five SEC Commissioners, including Chair Gary Gensler, next week. This marks the first time since 2019 that the entire commission will appear before Congress. This hearing is occurring amid an increasing sentiment among legislators and industry participants who have accused the SEC of adopting a hostile stance toward blockchain technology.
House Majority Whip Tom Emmer and Chairman Patrick McHenry have expressed some of the most significant concerns about the SEC’s posture on regulating crypto airdrops, which they believe is essential for decentralizing blockchain networks. Some of them directly accused the agency of exacerbating the issues, arguing that its regulatory paradigm is not well-suited to the expanding digital asset sector.
Gensler is currently under investigation for allegations of illegal hiring, in addition to Coinbase CLO and Ripple CLO challenging the legal direction of the SEC. This investigation may complicate his forthcoming hearings before the House Financial Services Committee, during which he is expected to be questioned not only about the SEC’s position on digital assets but also about the agency’s management.
