During a recent hearing before the House Financial Services Committee, Congressman Tom Emmer sharply criticized SEC Chair Gary Gensler, characterizing him as the most destructive and lawless chair in the agency’s nearly century-long history. Emmer’s comments focused on Gensler’s introduction of the term “crypto asset security,” which he argued lacks a legal basis and has resulted in an aggressive enforcement strategy against the cryptocurrency sector. He pointed out that this arbitrary term has driven regulatory actions for three years, only to be retracted by SEC lawyers in a recent court footnote.
Emmer further questioned Gensler about the SEC’s management of the Debt Box case, a legal dispute involving allegations of a $50 million fraud scheme linked to a crypto startup. The SEC subsequently lost the case, ordered to pay $1.8 million in fees, leading Emmer to assert that the agency’s attorneys had misrepresented facts to align with Gensler’s anti-crypto stance. In response, Gensler conceded that the handling of this case was subpar.
Gensler also faced scrutiny from within the SEC, as Commissioner Hester Peirce remarked on the need to retract the term “crypto asset security” much earlier. She indicated that clarity and precision in regulatory language had been lacking, and acknowledged that the SEC should have recognized that many crypto tokens do not qualify as securities. Peirce pointed out that while congressional input could enhance regulatory definitions, the agency itself had avoided providing necessary guidelines thus far.
Amidst calls from 42 lawmakers to eliminate the SEC’s Staff Accounting Bulletin No. 121, Gensler maintained that the regulation would remain in effect. The rule requires SEC-reporting entities that handle cryptocurrencies to categorize those assets as liabilities on their balance sheets. Critics, including Representative Wiley Nickel, argue that this regulation hampers the security of digital assets and limits the ability of U.S. banks to manage crypto exchange-traded products, potentially increasing overall risk.
