The US Securities and Exchange Commission (SEC) faced a barrage of criticism during a congressional hearing on Wednesday, 18 September 2024. This came as a predominantly critical witness panel voiced their concerns over the agency’s regulatory approach towards digital assets.
The hearing, titled “Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Assets,” served as a preview of a forthcoming full committee hearing on September 24, where all five SEC commissioners, including Chair Gary Gensler, will testify before the House Financial Services Committee.
The two-hour session saw the SEC under fire from Republican lawmakers, crypto-friendly Democrats, and several witnesses who accused the agency of regulatory overreach and ambiguity.
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Former Commissioner Reprimands SEC
Former Commissioner Daniel Gallagher, now a senior lawyer at Robinhood Markets, highlighted a “very frustrating” situation involving his company’s attempt to register with the SEC for crypto activities.
According to Gallagher, Robinhood was met with resistance and is now facing a potential enforcement action related to its “very compliant” crypto offering.
“We have to look over our shoulder left and right because of this regulatory uncertainty,” Gallagher stated, arguing that the SEC has been neglecting its legal authority, which could have enabled it to initiate rulemaking for the digital assets sector.
The SEC has taken a tougher stance against crypto firms in 2024. More specifically, the regulator imposed nearly $4.7 billion in enforcement actions against crypto companies, a 3,018% increase from 2023.
The fines included forfeitures, disgorgement, civil penalties, settlements, and prejudgment interest, calculated from the time the SEC initiated each case.
It is worth noting that the regulatory agency has also faced some setbacks. Back in July, the SEC closed its three-year investigation into Hiro Systems. The agency’s conclusion came just a day after it closed a separate case involving stablecoin issuer Paxos.
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Democrats Mention Trump’s Crypto Project
During the hearing, several Democrats mentioned former President Donald Trump’s family crypto project, World Liberty Financial.
Rep. Sean Casten (D-Ill.) criticized the project, suggesting that its intent to retain 20% of its tokens for insiders appeared designed to bypass the Financial Innovation and Technology for the 21st Century Act (FIT21).
The proposed legislation considers projects with less than 20% internal ownership as decentralized.
Rep. Brad Sherman (D-Calif.), a vocal critic of the crypto industry, targeted Trump directly. “He’s announced that he is now the chief crypto advocate,” Sherman remarked.
“So on the one hand, he has all that power given to him by the Republican Party. On the other hand, he’s trying to make billions of dollars advocating for crypto. That’s a conflict of interest that makes Clarence Thomas look like Mother Teresa,” he said.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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