United States Securities and Exchange Commission (SEC) Chairman Gary Gensler testifies before a Senate Banking, Housing, and Urban Affairs Committee oversight hearing on the SEC on Capitol Hill in Washington, United States, 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 before the House Financial Services Committee, Gensler stood firm on his view that trading platforms and crypto exchanges should abide by strict US securities laws.
"All of these companies should comply with the law, and until they do, we will continue to prosecute them as a cop on the spot, and will investigate and follow the facts and the law," Gensler told the panel.
Republicans raised many of the points the crypto industry regularly raises about regulation, saying the SEC's disclosure rules were designed to regulate traditional markets and are ill-suited to decentralized crypto exchanges. digital currencies.
Without congressional legislation that creates a new regulatory framework specifically for crypto, the companies say, digital platforms will move overseas to avoid clashing with U.S. regulators.
This could weaken America's status as a hub of cryptocurrency innovation, they argue, and potentially cede that position to American adversaries.
"Your approach spurs innovation overseas and endangers American competitiveness," committee chairman Rep. Patrick McHenry, RN.C., told Gensler at the start of the hearing.
“Regulation by enforcement is neither sufficient nor sustainable,” McHenry said. "You are punishing digital asset companies for not adhering to the law when they don't know it will apply to them."
Gensler, however, dismissed the idea that crypto trading platforms don't know how to interpret US securities laws.
“We have a whole area of crypto that understands the law, and if they provide exchange services, brokerage services, crypto security token clearing services, they should come into compliance,” said Gensler in response to a similar point later in the hearing.
Throughout his testimony, Gensler declined to discuss details of his investigation into FTX's collapse, and most recently, his notice to Coinbase last month that the crypto exchange was under investigation. .
The SEC has stepped up its enforcement of the crypto industry, going after companies and projects that it believes are selling unregistered securities. Reports first surfaced of an SEC probe into Coinbase in mid-2022.
Facing the House committee on Tuesday, Gensler showed little sympathy for the challenges facing crypto exchanges operating in the United States.
"We have a clear regulatory framework built over 90 years," he said. Exchanges are "just a bunch of intermediaries in this market who think they have a choice. They don't have a choice. They are generally not compliant and they have to come into compliance," he added. .
The prospect of legislation to regulate digital currencies has faded this year, drowned out by confrontation over the debt ceiling and the House Republican majority's focus on issues such as energy and countering the multi-pronged threat from China.
Nonetheless, major crypto industry groups plan to spend millions of dollars this year to lobby Congress and the Biden administration.