US lawmakers propose SEC chair consider legislation, not enforcement approach to crypto

Representatives French Hill and Dusty Johnson suggested the SEC may have undertaken certain actions on crypto “seemingly timed to coincide with related Congressional activity”.

Two members of the United States House of Representatives have added their names to a list of lawmakers criticizing Securities and Exchange Commission (SEC) chair Gary Gensler’s approach to digital asset regulation. 

In a letter to Gensler dated July 19, Representatives French Hill and Dusty Johnson suggested legislation was a more effective approach to addressing regulatory issues in the digital asset space rather than the SEC’s position to “regulate by enforcement”. The two lawmakers are the respective chairs of subcommittees on Digital Assets, Financial Technology and Inclusion and Commodity Markets, Digital Assets, and Rural Development with the House Financial Services Committee and House Agriculture Committee.

“Legislation would do far more to prevent future collapses of digital asset firms than enforcement actions,” said the letter. “A statutory framework would establish a process for firms to come into the regulatory parameter and comply with consumer protections, rather than relying on enforcement actions to punish a bad actor after the damage has already been done.”

The SEC cannot continue to regulate by enforcement. The lawsuits filed against digital asset firms are not protecting the public and are stifling innovation and growth.

My letter to SEC Chair Gensler ⬇️ pic.twitter.com/RjoBNs5YQs

— Rep. Dusty Johnson (@RepDustyJohnson) July 19, 2023

Reps. Hill and Johnson hinted at certain actions by the SEC “seemingly timed to coincide with related Congressional activity, which appears calculated for maximum publicity and political impact”. Other members of Congress have questioned Gensler on the timing of the SEC’s charges against former FTX CEO Sam Bankman-Fried, given he had been scheduled to testify before the House Financial Services Committee in December 2022.

Related: SEC’s Gensler offered to serve as an adviser to Binance in 2019, lawyers claim

The two lawmakers also referenced a “recent summary judgement” affecting crypto regulation, likely referring to an SEC v. Ripple ruling suggesting XRP was not necessarily a security. In the wake of the court decision, other House Representatives have called on Gensler to reconsider the commission’s current approach to regulating crypto. The SEC chair said he was “disappointed” in the ruling due to its impact on retail investors, and the commission would be assessing the situation.

Lawmakers in the House Financial Services Committee are considering a draft market structure bill aimed at clarifying the roles the SEC and Commodity Futures Trading Commission would play in regulating crypto. The bill has yet to be officially introduced, and may be amended based on feedback from lawmakers and industry leaders.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?