“Our Patience is Wearing Thin”: Gensler & SEC Face Congressional Crypto Wrath
28 Sep 2023 by Rory Kejzerko 3 min read
“Our Patience is Wearing Thin”: Gensler & SEC Face Congressional Crypto Wrath

Yesterday saw the Chair of the Securities and Exchange Commission (SEC) Gary Gensler face Congress’s House Financial Services Committee once again.

Here, Gensler-skeptic Representative Patrick McHenry (North Carolina) led the panel, where per the overseer’s own description, the hearing took place to:

“Conduct oversight of the SEC with testimony from Chairman Gary Gensler. Republicans will hold Chair Gensler accountable for his reckless approach to rulemaking, lack of a capital formation agenda, crusade against the digital asset ecosystem, and unresponsiveness to Congressional oversight”. 

From this description alone, we already knew it was going to be juicy…

Gensler Crypto Highlights

As you may have already seen through the following clip (which has been making the rounds across social media), the hearing’s standout moment came when Gensler adopted textbook politician/government tactics when McHenry mentioned his previous ‘not a security’ Bitcoin ruling. 

As the above video shows, Gensler outright refused to classify Bitcoin as a commodity, despite the fact that he’d confirmed that it doesn’t meet ‘security’ requirements of the Howey Test. Here we then can pose the question, ‘well what is it then?’. 

McHenry also went on to say that Congress’s “patience is wearing thin,” “other financial regulators have routinely complied with congressional oversight, and that Gensler’s recent antics are a “crusade against the digital assets ecosystem” (go McHenry!). 

These criticisms come as the SEC ‘refused to be transparent with Congress’ regarding its interactions with FTX and Sam Bankman-Fried, and has also been unresponsive when it comes to meeting Congress’s oversight requirements. With regards to the latter point here - something McHenry calls ‘unacceptable’ - Gensler and the SEC had failed to disclose any non-public documents that were requested by Congress back in February.

Here, we could then ponder the repercussions and outrage that would come if a crypto firm were to similarly neglect oversight requests from the SEC.

With this in mind, McHenry put the SEC in its place by stating that it ‘isn’t above the law,’ nor is it ‘unique’.

In putting Gensler right to the sword, McHenry then warned that he "doesn't want to be the first Chairman of this committee to issue a subpoena to the SEC…and you should not want to be the first SEC Chair to receive a Congressional subpoena”. 

For Gensler to avoid these woes, McHenry proposed a ‘path forward’ wherein the SEC begins recognising Congress as a ‘co-equal branch of government’ that is responsive to its oversight duties…

And if not, a subpoena will be on the cards for Mr.Gensler. 

Other Crypto Talking Points

As you’d expect, Gensler also had a lot to say himself regarding crypto matters (despite the fact that much of the hearing focused on issues outside of the cryptosphere, such as the SEC’s focus on climate issues).

Anyhow, his main crypto rhetoric throughout the hearing came by way of his concerns over the jeopardy posed by the space, as he dubbed crypto entities as ‘hucksters’ that are dangerously mixing assets in ways that are outlawed across other US financial systems.  

Although outspoken when slamming the space over these concerns, he then retreated once-again when declining to answer Representative Stephen Lynch’s (Massachusetts) questions about the SEC’s ongoing court battle with Ripple (XRP). 

Another major talking-point arose when speaking about the looming congressional budget impasse - an unfortunate circumstance that Gensler’s says will see over 90% of SEC staff laid-off. When it comes to what this’ll mean for crypto, he warned that the SEC will be in a ‘skeletal’ state when deciding the fate of the several big-name Spot Bitcoin ETF applications in waiting (i.e. another matter  that the SEC has failed to properly act upon, despite even receiving personal pleas from US officials to get its ass in gear).

For a full rundown of the hearing - which is the second Gensler-centric Congressional instalment of the month - visit its official page on the House Financial Services Committee website. 

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This article is intended for educational purposes and is not financial advice.