A recent hearing by a congressional subcommittee revealed that crypto has been the most contentious area of the SEC’s enforcement wing. It was also clear that partisanship is evident in the decision-making process of the financial regulator.
During a hearing before Congress today, the main concern was with crypto’s work by the Securities and Exchange Commission.
Gurbir Grewal (director of the SEC’s Division of Enforcement) was a witness before a subcommittee on investor protection of the House Financial Services Committee.
The subcommittee asked many questions about the SEC’s crypto enforcement work. As did many of their colleagues, Chair Brad Sherman and Ranking Member Bill Huizenga, they both focused their remarks on this topic. [link to an earlier story]
Maxine Waters, Chair of the Full Committee, stopped by to point out the damage to Americans’ savings between last year’s “meme stock” events, SPAC’s implosion, and this year’s catastrophic crypto crash.
Grewal, however, leaned on the long-standing SEC policy of not commenting on any aspect of the SEC. One response was from Grewal: “I cannot talk about what matters matter we’re looking into and not looking at.”
In preparation for increased enforcement, the SEC recently strengthened its crypto team . This event set the stage for crypto. Members of the subcommittee realized that crypto seemed to have overtaken concerns about ESG reporting and tightened Insider Trading, which were at the heart of the Biden administration’s regulatory agenda.
Although dissatisfied by the SEC’s crypto enforcement work, Congress expressed dissatisfaction with it. Democrats expressed more support for increased enforcement against crypto firms. The Democrats expressed more support for increased enforcement against crypto firms, with Sherman, a crypto critic of long standing, pushing for more SEC actions against them.
“If XRP can be considered a security, every exchange that deals with XRP must also be classified as a securities exchange. The major exchanges recognized this and delisted XRP. Sherman said that it was almost a confession by the exchanges that they did not do what they had done last year,” Sherman told The Block following the hearing.
Many major US stock exchanges removed the token from their listings in the month following an enforcement action by the SEC against Ripple in December 2020.
Jim Himes noticed an increase in interest in crypto enforcement. Note: “The list of names — Tether (Voyager), Celsius etc. etc. “Where we have seen really significant declines, bankruptcies, or questions about fraud,” Himes asked Grewal.
“What else does the SEC require in this, perhaps, pause in excitement about cryptocurrency?”
Republicans on the committee, in keeping with their traditional hostility to executive agencies, were less interested seeing the SEC enforce more of its laws. Huizenga said that the SEC’s enforcement strategy is being made up by them. He said that Gensler did not seem to communicate Gurbir’s priorities.
Huizenga stated that while the commission did not intend to clarify crypto assets, it was determined to increase enforcement.
Tom Emmer, who was a member the full committee, joined the proceedings and railed against Gensler’s political regime in the SEC. He highlighted letters Enforcement had sent to crypto exchanges. Responses were, according the congressman less than voluntary.
Emmer stated, “It seems obvious to everyone except perhaps those at the SEC that regulation in good faith is not being done by the SEC.” It is most evident in the digital asset sector.
However, the confirmation of Gary Gensler is the only time that the crypto industry has been clamoring for a registration system with Commodity Futures Trading Commission to allow exchanges.