Rep. Warren Davidson (R-Ohio) is behind a new bill that would end U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler’s position after the agency’s plan to possibly redefine what an “exchange” means in terms of cryptocurrency.
“To correct a long series of abuses, I am introducing legislation that removes the Chairman of the Securities and Exchange Commission and replaces the role with an Executive Director that reports to the Board (where authority resides),” Davidson wrote in a April 16 Twitter post. “Former Chairs of the SEC are ineligible.”
Gensler said during an April 14 meeting that SEC’s proposed rule amendments could be beneficial by increasing regulatory scrutiny of the crypto industry and "modernizing" rules related to exchanges, CoinTelegraph reported.
“Given how crypto trading platforms operate today, many of them currently are exchanges regardless of this reopening release we’re considering today,” Gensler said at the meeting, according to CoinTelegraph. “These platforms match orders of multiple buyers and sellers of crypto securities using established non-discretionary methods. That’s the definition of exchange, and today, most crypto trading platforms meet it.”
When the SEC proposed similar amendments in January 2022, crypto advocates called them an overreach that could be detrimental to participation in the crypto industry.
SEC Commissioner Hester Peirce expressed her dissent in a statement released April 14, saying the proposed amendments "embrace stagnation, force centralization, urge expatriation, and welcome extinction of new technology." She criticized the SEC's current approach to regulation, saying it "aggressively expands its regulatory reach to solve problems that do not exist." She emphasized that the SEC will urge entrepreneurs to register, but when those companies try to do so but cannot, "the Commission dismisses the possibility of making practical adjustments to our registration framework to help entrepreneurs register, and instead rewards their good faith with an enforcement action."
Paul Grewal, who thanked Peirce for her statement, described a similar situation related to Coinbase, the largest crypto exchange in the U.S., where he works as chief legal officer. After the SEC sent a Wells notice to Coinbase, Grewal said in a blog post that Coinbase has attempted to be compliant and register with the SEC, but the SEC has not been communicative. Last summer, the SEC asked Coinbase if it would be interesting in registering with the SEC and laying out what a potential path for registration would look like, given that a path for crypto exchanges to register does not currently exist. Grewal said Coinbase was absolutely interested in registering with the SEC and developed and proposed two different models for registration.
“We spent millions of dollars on legal support to build these proposals and repeatedly asked for the SEC’s feedback,”Grewal wrote in the blog post. “We got none.”
He said the SEC also declined multiple invitations to provide feedback or raise questions about Coinbase's listing process.
“If our regulators cannot agree on who regulates which aspects of crypto, the industry has no fair notice on how to proceed,” Grewal wrote in the post. “Against this backdrop, it makes no sense to threaten enforcement actions against trusted public companies like Coinbase who are committed to playing by the rules. It makes even less sense to threaten enforcement actions unless an industry participant concedes that non-securities can be regulated by the SEC. That is for Congress to decide.”
