A senator who supports cryptocurrency thinks SEC enforcement-based regulatory strategy is counterproductive.
Senator Pat Tomey, well-known for his outspoken support of the cryptocurrency sector, claims that the Securities and Exchange Commission (SEC) of the United States could have stopped the loss of $12 billion in assets by investors who relied on Celsius, a platform for crypto lending, which frozen their deposits in June.
Toomey said in an official letter to SEC Chairman Gary Gensler dated July 26 that the Commission’s inability to make clear how it would apply current securities regulations to digital assets and services would have unfavorable consequences. As Toomey puts it:
“Companies could have adjusted product offerings accordingly, preventing investor losses today, and the SEC would have been free to focus enforcement efforts on the worst actors.”
Toomey claims that the SEC failed to adequately explain how the Howey and Reves criteria applied to products offered by cryptocurrency lending platforms that paid interest to users who made cryptocurrency deposits. He stressed that the SEC has instead decided to govern through selective enforcement.
The senator brought up the recent insider trading allegations against a former Coinbase employee and asserted that the SEC had a clear perspective on the securities status of these assets but that view had not been made public prior to taking enforcement action.
He points out that the SEC’s regulation-by-enforcement approach, which starts with the questionable premise that the majority of digital assets are securities, makes it challenging for well-intentioned businesses to comply and offers little protection for clients.
As a result, Toomey claims that the SEC’s ongoing failure to provide the crypto industry with legal clarity and “an apparently slow enforcement pace” damages neither investors nor innovation in general.
Finally, Toomey asks Gensler nine questions, asking him to reply by August 9. Among them are proposals to publicly identify other significant crypto lending firms that do not have SEC registration, to clarify why the Commission did not prosecute the employee of Coinbase for trading 16 out of 25 digital assets.
On May 10, Toomey made his support for the Stablecoin Innovation and Protection Act known. This bill would let the Federal Deposit Insurance Corporation back stablecoins similar to how it already backs fiat deposits.
