SEC Chair Gary Gensler will head to Capitol Hill on Thursday to testify before the Senate Banking Committee, where Republicans are expected to grill the SEC chief for a lack of oversight on crypto markets.
Ranking Member Pat Toomey (R-Pa.) and Senate Banking Committee Republicans are expected to argue Gensler is pursuing a “highly politicized liberal policy agenda” that has distracted him from protecting investors and maintaining fair and orderly markets, according to a Senate Banking Committee Republican aide.
During Thursday’s hearing, Republicans are expected to skewer Gensler for not offering regulatory clarity for crypto companies, while also arguing the SEC contributed to the bankruptcy of some crypto lenders by not having clear rules.
Senate Republicans will argue the SEC failed to act before crypto lending platforms Celsius and Voyager went bankrupt despite the platforms offering securities, resulting in billions of dollars in losses for customers.
Toomey and other Republicans are set to argue the SEC has adopted a "regulation by enforcement" approach to crypto, instead of writing rules to offer guidance to the industry.
Toomey wrote in a letter to Chair Gensler back in July: “Had the SEC responded to calls for clarity on how it would apply existing securities laws to novel digital assets and services, things could have been different. Companies could have adjusted product offerings accordingly, preventing investor losses today, and the SEC would have been free to focus enforcement efforts on the worst actors.”
Toomey maintains Gensler refused to answer questions clarifying crypto regulations, including which cryptocurrencies the SEC views as securities and which it views as commodities.
When Yahoo Finance asked Gensler this summer why the SEC hasn’t acted more aggressively to write rules to protect investors, Gensler said he rejected the premise.
“We have rules in place for what it means to be an investment company, like a mutual fund, when you put your money in,” said Gensler. Gensler pointed to enforcement actions the Commission has taken against crypto firms that violated securities laws, specifically, crypto company BlockFi.
Thursday’s hearing comes as crypto markets remain under pressure as anticipated rate hikes from the Federal Reserve weigh on broader financial markets. After rising above $22,000 over the weekend, Bitcoin was trading closer to $20,000 as of Wednesday morning.
While lawmakers are set to question Gensler on the SEC’s approach to regulating crypto, there remain various legislative proposals on Capitol Hill to regulate crypto.
These proposals include one from Toomey on stablecoins that would subject these assets to new federal disclosure rules, and others like a large comprehensive bill from Senator Kirstin Gillibrand (D-NY) and Cynthia Lummis (R-WY) that aims to creates a common set of definitions for digital assets, define which regulators have jurisdiction, and protect consumers.