Lack of Crypto Compliance Is SEC's Fault, Say Republican Lawmakers

A chorus of Republican lawmakers sang out against SEC Chair Gary Gensler on Tuesday, roasting the official’s approach to regulating the digital assets industry in a letter of condemnation.

The letter landed just ahead of Gensler’s testimony before the House Financial Services Committee, centered on oversight of the Securities and Exchange Commission, and just after the agency boss celebrated his second full year at the Commission’s helm.

Commemorating the milestone in a Twitter post yesterday, Gensler highlighted the agency’s 1,500 enforcement actions filed over the past two years, which he said involve actions against “rampant noncompliance in the crypto markets.”

But the perceived lack of compliance falls squarely on Gensler due to a lack of clear rules and a nonexistent path for crypto trading firms to register with the financial watchdog, the letter claims.

“Without clear rules of the road, your push for firms to ‘come in and register’ is a willful misrepresentation of the SEC’s non-existent registration process,” the letter states. “The only entity to blame for the lack of registrants is the SEC itself.”

The letter accuses Gensler and his agency of forcing the digital assets ecosystem into a regulatory framework that’s neither compatible nor applicable as well, putting forth the notion that “firms’ activities do not involve an offering of securities.”

Signaling a unanimous sense of criticism on behalf of Republicans on the House Financial Services Committee, the letter was signed by each member. One of them, Warren Davidson (R-OH), has said he plans on introducing legislation to have Gensler fired.

Republicans take aim at Gensler

Committee Chairman Patrick McHenry (R-NC) also took the gloves off ahead of Gensler’s testimony in an interview with CNBC anchor Andrew Ross Sorkin, condemning his performance as a regulator on Tuesday morning.

“Gary Gensler has had a woeful act to just go out and send Wells Notices rather than actually provide any clarity so we can have this innovation here in the United States,” he said, referring to SEC’s step-up in scrutiny towards digital asset firms so far this year.

McHenry referenced legislation that would clarify how cryptocurrencies would be considered commodities versus securities, an area of disagreement between the Commodity Futures Trading Commission and SEC that could impact which regulator has authority over swaths of the industry.

He also mentioned the need for regulation regarding stablecoins, which the House Financial Services Committee is scheduled to discuss tomorrow. The Committee plans on reviewing 72 pages worth of draft regulation that’s been proposed on the technology.

Republican lawmakers have been bent on bringing regulatory clarity to the digital assets industry, forming a Financial Services Subcommittee dedicated to creating rules for the road earlier this year.

From Gensler’s point of view, rules for the digital assets industry “actually already exist” in the form of today’s securities laws, he said during testimony last month. Additionally, Gensler has leaned on the Howey Test as a guide for determining what digital assets constitute a security versus a commodity.

The letter concludes by urging the SEC to work with Congress, saying it would ensure innovators and investors have proper protections and yield regulatory clarity that actors in the digital assets space have been seeking for years.

“You have failed to provide a path that allows digital asset trading platforms to register,” it states. “We look forward to continuing our discussion on these critical issues.”