The House Financial Services Committee held a significant hearing today with US SEC Chairman Gary Gensler and four other Commissioners: Caroline A. Crenshaw, Hester Peirce, James Lizarraga, and Mark Uyeda. This marks the first time since 2019 that all Commissioners have testified before Congress together.
During the hearing, Chairman Patrick McHenry raised concerns about the terminology surrounding digital assets and the lack of clarity in defining which tokens are considered securities. Gensler emphasized that the economic function of a token is more important than labeling it as a security. However, Commissioner Peirce highlighted the regulatory ambiguity in distinguishing different types of digital assets, stating that the SEC’s imprecise language has hindered clear definitions.
Peirce, affectionately known as “Crypto Mom,” expressed frustration with the SEC’s reluctance to definitively classify tokens as securities or investment contracts. She emphasized the importance of providing regulatory clarity to facilitate secondary sales and listing requirements. When asked if the SEC could provide guidance on crypto regulations, Peirce affirmed that the regulator has the authority to do so but has chosen not to.
Another key point discussed during the hearing was the inefficiency of the “regulation by enforcement” approach. Chairman French Hill questioned Commissioner Peirce on this matter, to which she criticized the approach as ineffective in protecting investors and utilizing the SEC’s resources efficiently. Peirce advocated for establishing clear regulatory boundaries to focus resources on areas where the SEC’s intervention is necessary.
Chairman Hill also inquired about the SEC’s capacity to address the crypto industry’s demand for regulatory clarity. Commissioner Uyeda confirmed that the SEC possesses a range of tools to provide clarity on securities classification for tokens and ensure compliance for crypto-related products and services.
Overall, the hearing underscored the urgent need for regulatory clarity in the crypto industry and emphasized the SEC’s role in providing guidance to market participants. Stakeholders are hopeful that the SEC will prioritize clarity and consistency in its approach to regulating digital assets.