Representative Tom McHenry believes Gary Gensler’s SEC has disregarded standard practice when going after crypto.
Gary Gensler, the head of the U.S. The Securities and Exchange Commission has confirmed that his agency does not have the authority or intention to ban cryptocurrency.
While responding to questions during an Oct. 5 House Committee on Financial Services hearing, Gensler emphasized that prohibiting crypto does not fall within the SEC’s mandate, stating: “That would be up to Congress.”
“It’s a matter of how we get this field within the investor consumer protection that we have and also working with bank regulators and others — how do we ensure that the Treasury department has it within anti-money laundering, tax compliance,” Gensler said.
“Many of these tokens do meet the test of being an investment contract, or a note, or a security,” he added, emphasizing the need to bring crypto “within the investor protection remit of the SEC.”
Gensler also noted “the financial stability issues that stablecoins could raise” as a priority for the agency.
Representative Patrick McHenry took aim at the actions and stance taken by SEC regarding digital assets under Gensler’s leadership during the hearing, accusing the SEC head of failing to act in accordance with the agency’s “long-held practice of noticing comment on rulemaking and procedures.”
“Some of those comments you have made have raised questions in the marketplace and made things less than clear. You’ve made seemingly off the cuff remarks that move markets, you’ve disregarded rule-making by putting a statement out without due process, and you’ve essentially run roughshod over American investors.”
Gensler responded that the SEC follows the administrative procedures act.
McHenry also cited comments made by Gensler to the Committee in 2019 while he was teaching at MIT in which he criticized past rulings from the SEC classifying Bitcoin and Ether as commodities.
When asked of his current views on the matter, Gensler stated: “I’m not going to get into any one token, but I think the securities laws are quite clear — if you’re raising money […] and the investing public […] have a reasonable expectation of profits based on the efforts of others, that fits within the securities law.”
The hearing came on the same day that McHenry proposed the Clarity for Digital Tokens Act of 2021, which draws heavily on the safe harbor proposal put forward by the pro-crypto SEC Commissioner Hester Peirce in February 2020.
During the hearing, McHenry pressed Gensler on whether he had taken the time to review Peirce’s proposal. While Gensler evaded answering whether he had reviewed Peirce’s proposal specifically:
“Commissioner Peirce and I have talked on her thoughts around a potential safe harbor. I think that the challenge for the American public is that if we don’t oversee this and bring in investor protection, people are going to get hurt.”