As U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler claims cryptocurrency exchanges already have regulations to follow, Blockchain Association CEO Kristin Smith argues lawmakers' introduction of a regulatory proposal draft just one week before the SEC sued two leading crypto exchanges is evidence there is a lack of regulatory certainty.
“Contrary to what Chair Gensler says, there is no regulatory clarity for digital assets as evidenced by two House committee chairs circulating a comprehensive regulatory proposal just last week. The Digital Asset Market Structure discussion draft is a step forward to not only craft effective regulation for digital assets, but also rein in Chair Gensler’s relentless crusade against American innovation," Smith said in a recent release from Blockchain Association.
This comes as the SEC filed lawsuits against Binance and Coinbase, the largest crypto exchanges in the world and in the U.S., respectively, earlier this week. The SEC alleges that Coinbase should have registered as an exchange with the SEC and accuses Binance of offering unregistered securities and permitting U.S. customers to use the global Binance platform, instead of restricting them to its U.S. platform, according to the SEC website.
After filing the two lawsuits, Gensler delivered prepared remarks at the Piper Sandler Global Exchange & Fintech Conference on June 8, where he pushed back against the insistence from lawmakers and industry participants that crypto companies need clearer regulations to follow, Crypto Slate reported.
“Congress included a long list of 30-plus items in the definition of a security,” Gensler said, referencing 1930s securities laws, which he argued are sufficient for covering digital assets. "Regardless, however, of the ledger being used, be it a spreadsheet, a database, or blockchain technology, when investors put their money at risk, it’s the economic realities of the investment that matter.”
According to a report by Market Watch, Democrat Congressman Ritchie Torres said Gensler and the SEC are undermining Congress’s efforts to legislate comprehensive regulations for the crypto industry.
“The latest enforcement action against Coinbase is an egregious example of regulation by enforcement,” Torres told MarketWatch. “It demonstrates a complete contempt for Congress which is in the process of developing a [regulatory] framework.”
The week before the SEC's lawsuits against Binance and Coinbase, Congressmen Patrick McHenry (NC-10), Chairman of the House Financial Services Committee, and Glenn "GT" Thompson (PA-15), Chairman of the House Committee on Agriculture, released a draft of a bill intended to provide clarity for and fill the gaps in regulation of the digital asset industry. The discussion draft includes amendments to the Securities Act of 1933 and the Commodity Exchange Act, which would add terms like "blockchain," "source code," "digital commodity custodian," and "digital asset issuer," according to a copy of the draft. The draft bill also lays out provisional requirements for digital exchanges, brokers, and dealers to register with the Commodity Futures Trading Commission (CFTC), and for "alternative traders" to register with the SEC.
The bill suggests adding reporting requirements for digital asset issuers on the risks related to the asset, as well as a process for certifying with the SEC that a blockchain is decentralized, according to a summary of the bill. The bill would exclude stablecoins and digital commodities from the definition of securities, but the SEC would be given authority over stablecoin transactions for anti-fraud enforcement purposes. The SEC would not have authority over the "design, structure, or operation of payment stablecoins."
"For months, our committees have worked collaboratively to establish a viable regulatory framework for digital assets necessary to protect consumers and promote American innovation. Today’s release of the discussion draft brings us one step closer to bringing regulatory certainty to these novel and emerging technologies," Thompson said in a statement. "This historic joint effort with the House Committee on Financial Services aims to close existing authority gaps between the CFTC and SEC and bolster U.S. leadership in financial and technological innovation.”
