SEC Chair Gary Gensler Unable to Answer if Ether is Security
- The Chairman of the United States House Financial Services Committee, Patrick McHenry, is not happy with the leadership of SEC Chair Gary Gensler.
- McHenry brought up the commission’s “punishing” of digital asset firms through regulation and enforcement without a clear path to compliance.
- McHenry went on to urge the US lawmakers to provide “clear rules of the road” for crypto through legislation.
- He also grilled Gensler to provide a status on Ether and confirm if ETH is a security or a commodity, and the SEC Chair was unable to give a clear reply.
US Congressmen are not happy with the way the Securities and Exchange Commission has been handling the regulation of digital assets under the leadership of Gary Gensler. The United States House Financial Services Committee, which is responsible for overseeing the work of the Federal Reserve, the United States Department of the Treasury, and the SEC, criticized Gensler and his agency heavily at an oversight hearing.
The oversight hearing took place on April 18 and was the first time the SEC Chair was facing the House Financial Services Committee since October 2021, before the multi-billion dollar collapse of crypto exchange FTX under Sam Bankman-Fried, also known as SBF in the crypto space, and the closure of crypto-friendly banks, Silvergate Bank and Signature Bank.
As the hearing began, the SEC was criticized by the Chairman of the House Financial Services Committee, Patrick McHenry, who is also the US representative for North Carolina’s 10th congressional district and has been serving since 2005. In his opening statement, McHenry brought up the commission’s “punishing” of digital asset firms through regulation and enforcement without a clear path to compliance, under the leadership of Gensler.
SEC Chair’s Refusal to Answer a Longstanding Query
McHenry went on to urge the US lawmakers to provide “clear rules of the road” for crypto through legislation and pressed SEC Chair Gensler to give a clear stand on the fact that Ether (ETH), the native token of the Ethereum blockchain, is a commodity or a security. If it is a security, it would fall under the regulatory purview of Gensler’s agency, or else it would fall under the Commodity Futures Trading Commission’s purview if ETH is considered a commodity.
The US Representative repeatedly asked the SEC Chair to answer if Ether can be considered a security or commodity, while noting that Gensler’s responses did not include specifics. McHenry stated that Gensler has qualified the world’s largest cryptocurrency, Bitcoin (BTC), as a commodity on a number of occasions, but he can’t decide the same for Ether.
“Clearly an asset cannot be both a commodity and a security,” said McHenry. “I’m asking you, sitting in your chair now, to make an assessment under the laws as they exist: is Ether a commodity or a security?”
Many people from the crypto community praised McHenry for thoroughly questioning the SEC Chair and asked to impeach him and “constrain him from doing further vandalism immediately.”
McHenry also pointed out that the SEC Chair has taken multiple enforcement actions without actually confirming if Ether and other cryptocurrencies can be classified as commodities or securities.
“You have pre-judged on this: You’ve taken 50 enforcement actions. We’re finding out as we go, as you file suit, as people get Wells notices, on what is a security in your view, in your agency’s view.”
On the other hand, Gensler noted that his agency had the means, the authority, and the will to bring crypto firms into regulatory compliance.
It is also important to mention here that Representative Warren Davidson has filed legislation in Congress to fire the Chairman of the US Securities and Exchange Commission.
“You have, essentially, a hotel California rule for crypto where you can check in anytime you like, but you can never leave. You have endless discovery with no resolution and no clarity for the captives in the market,” Davidson noted while proposing the legislation.
Davidson also added that the staff of the SEC was unhappy with Gesler’s decision due to the fact that companies and capital are leaving the United States. He aims to replace the role with an Executive Director that reports to the Board, where the actual authority will reside.
Interestingly, an old clip of the SEC Chair praising proof-of-stake-based blockchain, Algorand (ALGO), has resurfaced, and people believe that Gensler should be questioned on the same.