Both sides of the political aisle expressed dissatisfaction on Wednesday with the US Securities and Exchange Commission’s current policy towards digital assets.
The House Financial Services Committee Digital Assets Subcommittee on Financial Technology and Inclusion convened Wednesday to discuss how crypto market participants are navigating the current regulatory landscape — and what additional clarity is needed.
The Hearing, entitled “Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Assets,” The event featured experts in the field of law and participants from the market, such as Dan Gallagher, Chief Legal Officer at Robinhood Markets, and Teddy Fusaro President of Bitwise Asset Management.
The committee members wanted to know how the SEC defined “crypto asset securities,” A Democratic representative claimed that it was a term invented by the Agency.
“Did the SEC invent the term out of thin air?” Rep. Ritchie Torres of New York, D, asked Gallagher a question that was rhetorical.
Gallagher stated that the SEC’s Gary Gensler was a good example of how Robinhood attempted to follow Gary Gensler’s directions. “come in and register,” But found that current structures for special purpose broker dealers licenses sought by the exchange were incompatible with digital asset.
“We recommended modifications that would make it work, and we were submitting to full regulation by the Commission,” Gallagher gave testimony on Wednesday. “It was a fruitful process. It was very cordial with the SEC staff until about early 2023, when we got a very perfunctory note from the Chairman’s office telling us that there’s no reason to talk anymore.”
French Hill of the Subcommittee on Securities, R-Ark. said, “The SEC’s refusal to adapt its framework does not comply with securities laws.” SEC’s claims in federal court continue to exist “legal face plants,” He added that when attempting to defend the position that almost all cryptocurrencies were securities.
The Committee’s members do not share the same views. And despite some bipartisan collaboration, Wednesday’s hearing highlighted long-standing party differences over digital assets.
Maxine Wassers, D-Cali. asked the witnesses: Why did the vast majority companies, who faced SEC enforcement actions since 2021, settle for $5.5billion in fines and penalties, even though they didn’t do anything wrong?
Lee Reiners, a lecturing fellow at Duke University, responded by saying that he feels the SEC — under both former Chair Jay Clayton and current Chair Gensler — has overwhelmingly been in the right when bringing various enforcement actions against crypto players.
It has happened “one notable partial loss,” Reiners claimed that Ripple won a partial victory against SEC 2023 but this decision has been reversed. “repudiated by several other federal judges in that same federal district court.”
Rep. Sean Casten expressed concerns that the current legislative proposals did not protect the public against fraud. This was exemplified by his statement about the newly announced World Liberty Financial project which has been promoted by the Trump family.
The World Liberty team said they would retain control of 20% of the token supply, which, based on the Financial Innovation and Technology for the 21st Century Act — passed in the House in May — would mean the project is “decentralized and not subject to regulation,” Casten said.
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