Representative Tom McHenry feels the SEC, under Gary Gensler‘s leadership, has ignored regular operating procedures in its pursuit of cryptocurrency.
Gary Gensler, the president of the United States, has said that the U.S. The Securities and Exchange Commission has confirmed that his agency does not have the capacity or the intention to prohibit cryptocurrency trading in any form or at any time.
Gensler stated that forbidding cryptocurrency does not fit within the SEC’s authority during a hearing held on October 5 by the House Committee on Financial Services, adding that “that would be up to Congress” in response to one of the committee’s inquiries.
“It’s a matter of how we get this field within the investor consumer protection that we have and also working with bank regulators and others — how do we ensure that the Treasury department has it within anti-money laundering, tax compliance,” Gensler said.
Many of these tokens do fit the criteria for being an investment contract, a note, or security, he continued, highlighting the importance of bringing crypto “inside the investor protection remit of the SEC’s regulatory jurisdiction.”
In addition, Gensler stated that “financial stability issues that stablecoins potentially present” should be a top priority for the organization.
When asked about the SEC’s actions and stance on digital assets, Representative Patrick McHenry accused Gensler of not acting in accordance with the agency’s “long-held practice of notifying comment on rulemaking and procedures,” which he described as “a long-held practice of notifying comment on rulemaking and procedures.”
“Some of those comments you have made have raised questions in the marketplace and made things less than clear. You’ve made seemingly off the cuff remarks that move markets, you’ve disregarded rule-making by putting a statement out without due process, and you’ve essentially run roughshod over American investors.”
Gensler reacted by stating that the SEC adheres to the Administrative Procedures Act (AP Act).
Gensler made statements to the Committee in 2019 when he was teaching at MIT in which he challenged previous SEC rulings that classified Bitcoin and Ether as commodities, which McHenry noted. Gensler was a member of the Committee at the time of his comments.
The following is what Gensler had to say when asked about his current thoughts on the subject: “I’m not going to get into any particular token, but I think the securities laws are quite clear — if you’re raising money (…) and the investing public […] has a reasonable expectation of profits based on the efforts of others, that fits within the securities law.”
That same day, McHenry introduced the Clarity for Digital Tokens Act of 2021, which draws largely on the safe harbour idea put forth by crypto-friendly SEC Commissioner Hester Peirce in February 2020.
When McHenry interrogated Gensler at the hearing, he inquired as to whether he had taken the time to consider Peirce’s plan. While Gensler avoided answering the question of whether he had precisely read Peirce’s plan, he did say the following:
“Commissioner Peirce and I have talked about her thoughts around a potential safe harbour. I think that the challenge for the American public is that if we don’t oversee this and bring in investor protection, people are going to get hurt.”