Today’s hearing of the House Financial Services (HFS) Committee hearing on Oversight of the Securities and Exchange Commission (SEC) started before it began as the Committee’s Republicans led by Chair Patrick McHenry (R, NC) fired off a condemnation of SEC Chair Gary Gensler’s handling of digital assets in advance of the hearing’s start.
See the letter (PDF). And, see the accompanying press release.
In the letter, HFS Republicans called out Chair Gensler for misrepresenting his agency’s willingness to perform registration of digital asset companies. “You have been outspoken in your push for digital asset trading platforms to ‘come in and register’ under the national securities exchange (NSE) framework. Yet, at the same time, you have failed to provide a path that allows digital asset trading platforms to register.” With HFS Committee member Rep. Warren Davidson (R, OH) already threatening Gensler on Twitter with the loss of his job through a new, yet-unseen bill that would restructure the SEC, the stage was set for a combative meeting between HFS Republicans and Chair Gensler.
opening statements
As the hearing began, Chair McHenry called the meeting to order and began with his opening statement (read it) criticizing the SEC Chair on his digital assets “regulation by enforcement” agenda. He also noted that rule-making by the SEC had doubled under Gensler’s leadership. And he concluded with a condemnation of Gensler’s lack of response to Congressional Republicans requests of the SEC for information related to FTX and other issues. .
In her opening statement, Ranking Member Rep. Maxine Waters (D, CA) wasted no time in her opening statement (read it) in defense of Chair Gensler and called the investigations by Republicans as a “sham.” She blamed Republicans for alignment with Wall Street interests and the rejection of climate change rules for investing, hedge fund reforms and what she called deregulation. She applauded Chair Gensler for his strong enforcement of securities laws as it related to crypto.
Next up were Rep. Ann Wagner (R, MO) and Rep. Brad Sherman (D, CA) took brief turns on the far ends of criticism and compliments of Chair Gensler, respectively.
In his opening remarks, Chair Gary Gensler pivoted off a tweet he had carefully made before the hearing with the statue of lawmaker Sam Rayburn in the Rayburn House Office Building. He argued that artificial intelligence (AI) and not crypto was a more important topic as he looked ahead at his purview at the SEC, suggesting roboadvisors will be transformed to name a few of the impacts. The markets should serve investors not the other way around, he said.
See Chair Gary Gensler’s prepared testimony on the SEC website.
Q&A
HFS Chair McHenry began the question and answer of Gensler around whether Ether was a commodity or a security. Gensler never answered directly as much as Chair McHenry tried even if he did not seem very surprised.
Ranking Member Rep. Waters asked Gensler to explain to Chair McHenry how a security is defined. He indicated it’s a four-part test and provided some detail. Rep. Waters asked if Gensler had the framework he needed to bring crypto into compliance. Unsurprisingly, Gensler said he has what he needs. “I’ve never seen a field (crypto) that is so non-compliant,” said Gensler. Continue reading “Partisan Questioning of SEC Chair Gensler Leads To Few Surprises In HFS Oversight Hearing”