In a September 20 congressional gathering, the US Securities and Exchange Commission (SEC) faced tides of criticism for undermining the crypto growth. The meeting turned chaotic after the US lawmakers attacked the Gary Gensler regulatory approach on digital assets.
The policymakers accused Gensler and his team of extended enforcement action on digital assets without providing clear guidelines for issuing virtual assets.
Gary Gensler Defends SEC Regulatory Approach
On a defensive note, Gensler confirmed plans to enforce the Staff Accounting Bulletin (SAB) 121 to protect consumers from crypto losses. The SAB 121 took the centre of the discussion with US policymakers opposing the controversial rule.
A statement from renowned congressman Wiley Nickel claimed that the enactment of SAB 121 adversely affected the growth of the digital space, scaring away potential investors. Reflecting on the crashing down of FTX, which plunged many companies to liquidation, Nickel claimed that the lack of well-defined rules continues to hurt the crypto market.
He acknowledged that despite the departure of high-profile companies from the crypto space, the agency has turned down dialogues to amend the unfavourable crypto rules.
In response, Gensler argued that the SAB 121 was a good accounting approach for risky assets such as crypto. Under SAB 121, virtual assets service providers (VASPs) were mandated to report these assets as liabilities while preparing financial reports.
How SEC Enforcement Action Shakes Crypto Industry?
The policymakers argued that the SAB 121 contributed to bank runs such as the Silvergate and Custodia bank. They argued that this legislation stifled innovation in the financial sector.
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In a subsequent report, the House Financial Service Committee chair, Patrick McHenry, attacked the Gensler anti-crypto stance. Reviewing the FIT 21 Act, McHenry confirmed that the house had approved the bill to create clear rules for digital assets and impose adequate consumer protection measures.
The executive recalled that during the approval of the FIT 21 Act, around 70 democrats were against Gensler’s regulatory approach for digital assets. At that time, the policymakers called for clear rules for digital assets.
Elsewhere, commissioner Hester Peirce condemned the commission for their overreliance on enforcement action instead of providing explicit guidance on digital assets. The commissioner described the agency’s regulatory approach as unfavourable for a growing industry.
Hester lamented that its oversight of digital assets was inadequate since it lacked clear guidelines on how the market players should conduct their business to conform to the law. She added that the market regulators could not prioritize investor protection without defining the game’s rules.
Gary Gensler Rejects SEC Missteps
In support of Hester’s argument, commissioner Mark Uyeda urged the commission to explain how the securities law applies to digital assets. From his analysis, Uyeda argued that the agency could focus on explaining how the Howey test applied to digital assets.
He argued that it was important for the commission to demonstrate how the Howey Test examines whether an asset is a security or commodity. Uyeda’s remarks mirror an earlier argument from Congressman Tom Emmer, who urged the commission to explain how the securities law applied to digital assets.
The policy marker described Gensler’s leadership as destructive to the crypto industry. Emmer argued that the commission had been inconsistent in applying rules for digital assets. He noted that Gensler’s plot to define crypto assets as securities confers the agency’s excess regulatory oversight over the digital space.
Despite the regulatory backlash, Gensler vowed to enact SAB 121 to protect investors. The enactment of SAB 121 defines how the commission regulates the crypto industry and clearly defines the circumstances for issuing digital assets. To stay current with crypto regulations, follow The Bitjournal on the Telegram channel and X.
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