Several Republican Representatives used the hearing to accuse Mr Gensler of sabotaging the crypto business and called for his dismissal, while some eminent crypto firms hinted that they would be obliged to leave the country if the SEC does not change its approach.
The conversation has visibly come into a deadlock, and both sides – the SEC and the US crypto industry – will from now on be ramping up their efforts to try and impose their views.
The SEC hearing
The hearing was convened on April 18 to examine the oversight of the SEC and address the many uncertainties surrounding cryptoassets regulation (several other issues were discussed too, but crypto was by far the biggest one).
However, despite many questions asked, there were few responses.
Patrick McHenry, chair of the House Financial Services Committee, asked Mr. Gensler whether Ethereum was a security no less than 8 times, with the latter deflecting from each question.
Mr. McHenry also raised concern that the situation when an asset is claimed to be a security by one regulator (the SEC), and a commodity – by another (the CFTC), does not serve the market or the investors. He also accused Mr. Gensler of “punishing digital asset firms for allegedly not adhering to the law when they don’t know it will apply to them.”
To Gary Gensler, things appear clear: “The exchanges are just a bunch of intermediaries in this market that think they have a choice. They don’t have a choice. They’re noncompliant generally, and they need to come into compliance.”
However, as many crypto firms have noted, the “come in and register” system does not work, because crypto is different from traditional finance and some of the standard disclosures are not possible (and sometimes even dangerous for the investors).
Even within the SEC, there are people who agree there’s a problem: last week, Commissioner Hester Pierce issued a statement saying:
“Today’s Commission tells entrepreneurs trying to do new things in our markets to come in and register. When entrepreneurs find they cannot, the Commission dismisses the possibility of making practical adjustments to our registration framework to help entrepreneurs register, and instead rewards their good faith with an enforcement action.”
This must hit close to home for Coinbase, which submitted a rulemaking petition asking for clarity last year, but the SEC chose to ignore it and sent Coinbase a Wells Notice last month, announcing an upcoming enforcement action.
Other issues discussed at the hearing included SEC’s refusal to give details on the FTX investigation (or any other points on its agenda), potential harm to the innovation, and abuse of power. Rep. Warren Davidson also introduced legislation to remove Gary Gensler from his position.
US crypto industry response
Times are tough for the American crypto industry, and the biggest companies are determined to make their voices heard.
Coinbase launched an “Update the System” campaign across various media, and Ryan Selkis, CEO of crypto intelligence firm Messari, announced he would be spearheading a “$100 million, multi-entity, pro-crypto political campaign over the next 18 months”.
If lobbying and PR campaigns don’t work, some may be leaving the country.
Answering a question at the London Fintech Week, Coinbase CEO Brian Armstrong said: "Anything is on the table, including relocating or whatever is necessary”. He also met with the UK Economic Secretary and City Minister Andrew Griffith and highlighted how the “UK is moving fast on sensible crypto regulation to both drive economic growth AND consumer protection.”
This may be a part of the PR campaign, aimed at showing that Coinbase and other crypto companies could leave the US if they are not heard.
Written by D.Center
