Patrick McHenry, chair of the United States House Financial Services Committee, jumped right into criticism of the Securities and Exchange Commission and its leadership over digital assets at an oversight hearing.
In an April 18 hearing on oversight of the SEC, Representative McHenry used his opening statement to bring up the commission’s “punishing” of digital asset firms through regulation by enforcement without a clear path to compliance. The member of Congress reiterated calls for U.S. lawmakers to provide “clear rules of the road” for crypto through legislation. In addition, he pressed SEC Chair Gary Gensler to give a definitive answer on whether Ether (ETH) qualified as a security under the SEC’s purview or a commodity under the Commodity Future Trading Commission’s.
McHenry repeatedly talked over Gensler’s responses that did not include specifics, citing the SEC chair’s willingness to label Bitcoin (BTC) as a commodity and hinting at private discussions on ETH prior to the hearing.
“Clearly an asset cannot be both a commodity and a security,” said McHenry. “I’m asking you, sitting in your chair now, to make an assessment under the laws as exist, is Ether a commodity or a security?”
“You have pre-judged on this: You’ve taken 50 enforcement actions. We’re finding out as we go, as you file suit, as people get Wells notices, on what is a security in your view, in your agency’s view.”
.@GaryGensler's tenure has been defined by recklessness. His agenda runs roughshod over process, precedent, & the #SEC’s statutory authority. I look forward to speaking with him today.— Patrick McHenry (@PatrickMcHenry) April 18, 2023
Tune in at 10:00am https://t.co/qNdJ4wDkw5
Representative Maxine Waters, ranking member of the House committee, did not press Gensler on ETH but focused her questioning on the SEC’s enforcement capabilities. According to the SEC chair, the commission had the means, the authority and the will to bring crypto firms into regulatory compliance.
Many in and out of the crypto space have criticized the SEC under Gensler for taking enforcement actions against firms involved with digital assets and blockchain technology. On April 17, the SEC charged crypto asset trading platform Bittrex and its co-founder William Shihara for offering unregistered securities, and a Wells notice issued to Coinbase in March suggests the major exchange could be next.
Gensler claimed the crypto market was “rife with noncompliance”, in many cases firms willfully doing so. His written testimony said compliance with the SEC extended to decentralized finance platforms — an indication of the commission proposing changing its rules to include DeFi in exchanges under its purview.
The April 18 hearing was the first time Gensler had directly addressed the House committee since October 2021 — prior to the collapse of FTX, Celsius, BlockFi and crypto-friendly banks including Signature, Silicon Valley Bank and Silvergate. The Financial Services Committee will also meet to discuss stablecoin regulation in an April 19 hearing.