During the hearing held on October 5, Gensler stated that banning cryptocurrencies did not fall under the mandate of the SEC. “That would be up to the Congress,” he stated.
SEC’s Mandate is in the Regulatory Framework
Gensler further illustrated that the mandate of the commission was to regulate the market and ensure investor protection.
“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 also advocated for cryptocurrencies to be included in the “investors protection remit of the SEC”. In his argument, he stated that most of the cryptocurrencies in the market failed the test of being an investment contract or security.
Gensler also spoke on the issue with stablecoins. On this issue, the SEC boss stated that stablecoins were now a priority for the commission because of the financial stability risks posed by these assets.
Gensler Faces Heavy Criticism
Despite clarifying that the SEC’s mandate fell under crypto regulations, Gensler also came under fire for his previous remarks about the crypto space, which have often resulted in confusion. Representative Patrick McHenry spoke during the hearing stating that some of the comments made by Gensler in the past have raised more questions than answers.
“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,”
McHenry also criticized Gensler’s leadership at the SEC, stating that he has failed to comply with the commission’s long-held practices regarding commentary on rule-making and procedures during his tenure. On this issue, Gensler stated that the actions of the SEC are governed by the administrative procedures Act.
Gensler’s tenure at the SEC was not the only major issue raised at the hearing. The SEC Chair was also questioned on his remarks when he was a professor at MIT. During this time, Gensler critiqued the SEC’s rulings and stated that Bitcoin and Ethereum should not be classified as commodities.
McHenry asked Gensler if his views have changed regarding this matter, but the SEC chair stated that he would not address any specific tokens. He further added that the securities law was clear wherein if an asset is being used to raise money from the public and profits are realized, that token falls within the securities law.
McHenry has been pushing for a clear regulatory framework on digital assets. On October 5, he proposed the “Clarity for Digital Tokens Act of 2021.” The bill is in reference to a previous proposal by former SEC Commissioner Hester Peirce.
McHenry asked Gensler if the commission had reviewed Pierce’s proposal tabled on February 2020. However, Gensler failed to state whether he had assessed the contents of the proposals but rather stated that he had discussions with Pierce about creating a safe harbour for crypto investors. He also added that the main concern was how to enhance investor protection to guarantee more people are not hurt by investing in crypto.