Jake Chervinsky, the chief policy officer of Blockchain Association, a nonprofit that advocates for "pro-innovation" policies for the digital asset industry, called on U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler to remove himself from the SEC's decision-making process for carrying out enforcement actions in the crypto industry, citing Gensler's assertion that all digital assets except bitcoin are securities. Chervinsky's statement comes amidst a wave of SEC enforcement actions against crypto companies, while industry participants and lawmakers are calling for clearer regulatory guidelines for the digital asset industry.
“It’s clear that the digital assets industry cannot expect a fair assessment from Chair Gensler. His steadfast view that all digital assets except bitcoin are securities means that he cannot approach enforcement decisions with a fair and impartial mind, as required by the SEC’s Wells process and federal law,” Jake Chervinsky said. “The time has come for Chair Gensler to recuse himself from all decisions related to digital asset-related enforcement matters. If he refuses, then I expect enforcement targets will begin raising the matter of his recusal in SEC proceedings and in federal district courts.”
Gensler has stated that while he believes bitcoin is a commodity, “everything else other than bitcoin is a security,” CryptoSlate reported in February. If digital assets are securities, defined as an investment contract with the expectation of profit deriving from others' efforts, the SEC would have authority to regulate digital assets and would have oversight of crypto.
Gensler's assertion that most digital assets are securities indicates that when he is considering an enforcement action against a crypto company, he is not approaching the issue in an unbiased manner. The release said Gensler's recent enforcement actions "have further muddied the regulatory waters," rather than providing regulatory clarity for the digital asset industry.
In June, the SEC filed lawsuits against leading crypto exchanges Binance and Coinbase, accusing them of violating various securities laws, Federal Newswire previously reported. The lawsuits prompted lawmakers such as Senator Cynthia Lummis (R-WY) to criticize the SEC for relying on a "regulation by enforcement" approach, rather than working to provide clarity around the question of how digital assets should be classified.
“The SEC has failed to provide a path for digital asset exchanges to register, and even worse, has failed to provide adequate legal guidance on what differentiates a security from a commodity,” Lummis said in a tweet. "The SEC's continued reliance on regulation by enforcement continues to harm consumers. Real consumer protection requires creating a robust legal framework that exchanges can comply with, not pushing the industry offshore or into the shadows.”
Binance said in a blog post in response to the lawsuit that the company has tried to cooperate and communicate with the SEC, engaging in "extensive good-faith discussions," so Binance is "disheartened" that the SEC has chosen to pursue litigation. "Unfortunately, the SEC’s refusal to productively engage with us is just another example of the Commission’s misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry," the blog post said.
Coinbase CEO Brian Armstrong said in a tweet that he views the lawsuit against his company as an opportunity to seek regulatory certainty.
"Regarding the SEC complaint against us today, we're proud to represent the industry in court to finally get some clarity around crypto rules," the tweet said. He added that legislation is needed, given that the SEC and CFTC "have made conflicting statements, and don't even agree on what is a security and what is a commodity."
According to a press release, House Majority Whip Tom Emmer (R-MN) and Rep. Warren Davidson (R-OH) are advocating for the SEC to be "restructured" and for Gensler to be removed from his position as chair through their SEC Stabilization Act.
“American investors and industry deserve clear and consistent oversight, not political gamesmanship. The SEC Stabilization Act will make common-sense changes to ensure that the SEC’s priorities are with the investors they are charged to protect and not the whims of its reckless Chair," Emmer said in a statement. Davidson said the bill is needed "to fix the ongoing abuse of power and ensure protection that is in the best interest of the market for years to come."
