US Securities and Exchange Commission (SEC) Chair Gary Gensler testifies before the Senate Banking, Housing, and Urban Affairs Committee oversight hearing on the SEC on Capitol Hill in Washington, US, September 14, 2021.
Evelyn Hockstein | Reuters
WASHINGTON — Securities and Exchange Commission Chairman Gary Gensler faced a barrage of criticism from House Republicans on Tuesday over his agency’s crackdown on cryptocurrency trading platforms.
In more than four hours of testimony to the House Financial Services Committee, Gensler stood by his view that crypto trading platforms and exchanges must comply with strict US securities laws.
“All of these companies must comply with the law, and until they do, we will continue to pursue them as the police on the beat, and investigate and follow the facts and the law,” Gensler told the panel.
Republicans have raised many of the points the crypto industry regularly makes about regulation, arguing that the SEC’s disclosure rules are designed to regulate traditional markets, and they are ill-suited to decentralized ones. digital currency exchange.
Without legislation from Congress creating a new regulatory framework specifically for crypto, the companies argue, digital platforms will move abroad to avoid the fallout of US regulators.
This could weaken America’s status as a hub for cryptocurrency innovation, they argue, and potentially cede that position to US adversaries.
“Your approach is driving innovation overseas and putting America’s competitiveness at risk,” said committee chairman Rep. Patrick McHenry, RN.C., to Gensler at the beginning of the hearing.
“Regulation by enforcement is not sufficient or sustainable,” McHenry said. “You’re punishing digital asset firms for allegedly not complying with the law when they don’t know it will apply to them.”
However, Gensler rejected the notion that crypto trading platforms do not know how to interpret US securities laws.
“We have a whole field in crypto that understands the law, and if they provide exchange services, broker dealer services, clearing services of crypto security tokens, they must comply,” said Gensler in response to a similar point later in the hearing.
Throughout his testimony, Gensler declined to discuss the details of its investigation into the collapse of FTX, and more recently, its notice to Coinbase last month that the crypto exchange was under investigation.
The SEC has stepped up its enforcement of the crypto industry, cracking down on companies and projects it says are trading unregistered securities. Reports first surfaced of an SEC probe into Coinbase in mid-2022.
Appearing before a House committee on Tuesday, Gensler showed little sympathy for the challenges facing crypto exchanges operating in the US
“We have a clear regulatory framework that has been developed over 90 years,” he said. The exchanges are “just a bunch of intermediaries in this market who think they have a choice. They don’t have a choice. They’re not generally compliant, and they have to be compliant,” he added.
Hopes of legislation to regulate digital currencies have faded this year, fueled by a showdown over the debt ceiling and the House Republican majority’s focus on issues such as energy and countering multi- pronged threat from China.
However, the major groups of the crypto industry is planning to spend millions of dollars this year to lobby Congress and the Biden administration.