US Lawmaker Condemns Gensler as most ‘destructive’ SEC Chair in Congressional Hearing

During a recent congressional hearing, U.S. Representative Tom Emmer fiercely criticized Securities and Exchange Commission (SEC) Chair Gary Gensler, labeling him as the most “destructive” and “lawless” chair in the SEC’s 90-year history.

Emmer expressed his frustration with Gensler, saying, “You’ve coined the term ‘crypto asset security.’ This term doesn’t exist in any statute, you invented it, and you’ve failed to offer any clear guidance on how a crypto asset security is defined within the SEC.” This criticism was voiced during a House Financial Services Committee hearing on Sept. 24.

According to Emmer, this term was the foundation of Gensler’s aggressive enforcement actions against the crypto industry for the past three years, only for SEC lawyers to withdraw the term in a court footnote last week.

Emmer further added, “Your inconsistency on this matter has put the nation at a disadvantage. In the SEC’s history, there hasn’t been a more damaging or unlawful chairman.”

He also questioned Gensler on the SEC’s handling of the Debt Box case, where the regulator accused a crypto startup of being involved in a $50 million fraud scheme. The case was dismissed on May 28, and the SEC was ordered to cover $1.8 million in legal fees. Emmer suggested that the SEC’s attorneys fabricated claims to align with Gensler’s “anti-crypto” stance and enforcement-driven regulatory approach.

In response to Emmer’s accusations, Gensler admitted, “The matters in that case were not well managed.”

SEC “should have admitted long ago” that crypto tokens aren’t securities: Peirce

Gensler also faced internal criticism, with SEC Commissioner Hester Peirce expressing dissatisfaction over the SEC’s retraction of the term “crypto asset security.” Peirce remarked that the retraction should have happened “a long time ago.”

Peirce explained, “[By] burying it in a footnote, we are finally acknowledging that the token itself is not a security. This is something we should have admitted long ago.” The commissioner, known for her pro-crypto stance, added, “We’ve failed in our role as a regulator by not being more precise.”

When asked about whether crypto tokens need a legal definition to clarify how securities laws apply to them, Peirce replied, “While it’s helpful for Congress to provide input, there are guidelines we could have issued ourselves, but we’ve chosen not to.”

Gensler confirms SAB 121 rule will stay in place

Despite the pressure from 42 U.S. lawmakers to revoke the SEC’s Staff Accounting Bulletin No. 121 (SAB 121), Gensler confirmed that the rule will remain in force.

“No, it’s a sound accounting bulletin,” Gensler responded when Representative Wiley Nickel inquired about rescinding the rule. The SAB 121 rule mandates that any entity reporting to the SEC and holding crypto assets in custody must list those assets as liabilities on their balance sheets. A bill to repeal SAB 121 gained bipartisan support in Congress, but it was vetoed by President Joe Biden in June.

Gensler defended the rule by stating it helps public companies better understand the risks of holding crypto assets, pointing to the collapses of FTX and Terraform Labs as evidence.

Nickel, however, pushed back, arguing that SAB 121 actually makes the digital asset market “less safe.” He pointed out that the rule would prevent U.S. banks from effectively custodying crypto-related exchange-traded products, increasing “concentration risk” by pushing control to non-bank entities.

Nickel was particularly critical of the SEC’s Office of the Chief Accountant for exempting Bank of New York Mellon from the reporting requirement, arguing it creates “different rules for different folks.”

Gensler, however, disagreed, stating, “It’s the same rules applied to different folks.”

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