SEC Chair Gary Gensler failed to prove clarity on whether Ethereum (ETH) is a security after the regulatory body came after six other cryptocurrencies.
As regulators strive to gain control over the cryptocurrency market, Gensler has appeared before the US House of Representatives Financial Services Committee and avoided a direct answer on whether ETH is considered a security.
Patrick McHenry, chair of the Republican-led Committee, quizzed Gensler on cryptocurrency regulations and climate disclosure rules, posing questions about the SEC’s approach to regulating crypto.
Evading the Ethereum Question
When asked directly by McHenry, “is Ether a commodity or a security?” Gensler attempted to sidestep the question, arguing that “it depends on the facts and the law and if there’s a group of individuals (…).” McHenry interrupted and restated that he was inquiring “about the facts and the law sitting in your seat and the judgment you are making.”
Furthermore, McHenry accused Gensler of failing to provide clarity to crypto firms on what constitutes a security contract, stating that he was penalizing companies for not adhering to the law while neglecting to provide clear guidelines.
In response, Gensler defended the SEC’s approach: “It’s not a matter of lack of clarity. I think this is a field that, in the main, has built up around non-compliance, and that’s the business model they have chosen. Even though it’s not the law, they’ve chosen to be non-compliant and not provide investors with confidence and protections, and it undermines the $100 trillion capital markets.”
Gensler did not mention crypto markets being incompatible with current securities laws and reiterated that the vast majority of cryptocurrencies are securities. He stated that it’s “the law, not a choice. Calling yourself a [decentralized finance (DeFi)] platform is not an excuse to defy securities laws.”
Gensler an ‘Incompetent Cop on the Beat’?
Additionally, Representative Tom Emmer noted that Gensler served as SEC chairman during some of the most significant and widely publicized collapses in the crypto industry, including Terra (LUNA) and FTX. Emmer highlighted that Gensler had met with FTX at least twice before its collapse.
In a video shared by YouTuber BitBoy Crypto on April 19, Emmer further accused Gensler of incompetence in regulating the crypto space, stating that his “intention to work against the SEC mission and put investors in harm’s way has been made very apparent.”
Emmer added: “Your regulatory style lacks flexibility and nuance, and as a result, you’ve been an incompetent cop on the beat, doing nothing to protect everyday Americans and pushing American firms into the hands of the [Communist Party of China (CCP)].”
Earlier, Ron Hammond, Director of Government Relations at the Blockchain Association, highlighted Gensler’s testimony as one of the key events in a “huge week for crypto policy.” Gensler received a stern letter from McHenry and the Chair of the Oversight and Investigations Subcommittee, Bill Huizenga, regarding the request for records relating to the arrest of crypto exchange FTX founder Sam Bankman-Fried.
Meanwhile, Representative Warren Davidson of Ohio has announced legislation that could potentially remove Gensler from his position as SEC chair, as revealed in a tweet published on April 18, accompanied by a video of the hearing.