- GOP representatives French Hill and Dusty Johnson argue the SEC’s regulatory tactics are aimed at hindering comprehensive crypto legislation.
- They believe the SEC is creating confusion by choosing enforcement over compliance, and they invite “productive engagement” on cryptocurrency legislation.
GOP Representatives Question SEC’s Crypto Regulation Tactics
Two GOP representatives in the U.S. House have expressed disapproval of the Securities and Exchange Commission’s (SEC) methods of regulating cryptocurrency. They speculate these actions were deliberately timed to obscure and undermine initiatives to develop comprehensive legislation.
According to a letter sent to the SEC’s chairman, Gary Gensler, by Representatives French Hill (R-Ark.) and Dusty Johnson (R-S.D.), the SEC’s decision to regulate through enforcement rather than promoting compliance creates confusion and disrupts efforts to bridge regulatory gaps.
Regulation Through Enforcement: A Step Backwards?
“In the face of Congressional efforts to close regulatory gaps, the SEC has chosen to navigate via enforcement,”
they wrote. This tactic does not facilitate compliance and consumer protection, but rather exacerbates ambiguity. This is clearly evidenced by the recent summary judgment—a nod towards Ripple’s partial triumph in its legal tussle with the SEC.
Escalating their argument, Hill and Johnson pointed out “certain Commission actions” that seemed meticulously timed to coincide with Congressional activities. This tactic, they argue, is likely designed for maximum publicity and political impact.
The allegations come at a pivotal moment for U.S. cryptocurrency, following the collapse of significant crypto businesses like FTX exchange last year. Aggressive regulatory actions have prompted surviving companies to explore friendlier jurisdictions and dissuaded startups from establishing their businesses within the U.S.
The representatives’ allusions appear to refer to the SEC’s recent lawsuits against prominent crypto exchanges Binance and Coinbase. Both cases were filed just days after the Republican chairs of two House committees publicized a draft proposing a comprehensive revamp of U.S. crypto regulations.
In their letter, Hill and Johnson referenced this draft, along with two bills introduced since 2021 and 15 hearings held over the past four years by their House committees (financial services and agriculture).
They argue that the SEC’s strategy does not shield the public.
“Legislation would do much more to forestall future breakdowns of digital asset firms than enforcement actions,”
they wrote. They assert that a statutory framework would set a process for companies to enter the regulatory boundaries and adhere to consumer protections, instead of counting on enforcement actions to penalize wrongdoers after the damage is already done.
The representatives ended their letter by welcoming a “productive engagement” from the SEC on proposed legislation.