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A U.S. senator has sent a strong message to the Securities and Exchange Commission (SEC) about the extent of interest in various topics related to digital assets.
Last week (September 24), Pat Toomey (R-PA), the ranking member of the U.S. Senate Banking Committee, sent a letter to SEC chair Gary Gensler. In the letter, Toomey criticized the SEC for regulating cryptocurrency companies “by enforcement instead of guidance” and handed it a list of questions in the hope that it could finally provide the industry with some much-needed clarity.
“For investors to benefit from a fair and competitive marketplace, regulators must proactively provide rules of the road to industry. Unfortunately, the SEC has instead adopted a strategy of regulation-by-enforcement in this area,” Toomey said in the letter.
However, it seems unlikely that Gensler will answer all the questions, especially the ones on more complicated subjects. He is not expected to do so “at least until they have a comprehensive framework sorted out”, Gene Grant, CEO of U.S.-regulated cryptocurrency company VRBex, told VIXIO.
"If the goal was to provide a metaphorical kick to the rump to ensure that the SEC and chairman Gensler were fully aware of the extent of the interest in various topics, then I think it may work. If the objective was to receive clear guidance and response to all those questions on a timely basis, then, to continue the metaphor, the foot missed the target," Grant said.
Toomey has asked the SEC chair to clarify its position on some important points in crypto-regulation. He has asked Gensler to identify the specific characteristics that distinguish a cryptocurrency that is a security from one that he believes to be a commodity.
He also asked Gensler to explain why he believes that stablecoins, which peg their value to the U.S. dollar, may be considered securities and what analysis the regulator takes when it decides about the status of specific stablecoins.
The SEC seems to be reluctant to give the green light to Bitcoin exchange-traded funds (ETFs), so the letter asks it to be clearer in that regard, pointing to the fact that regulatory bodies in Canada, Germany, Switzerland and Sweden do approve such exchange-traded products (ETPs).
“There are significant numbers of participants in the digital asset community and the greater financial services industry waiting upon answers to these questions and there has not been the appearance of a sense of urgency by the commission to provide answers," said Grant.
Apart from seeking answers to these questions, the lawmaker asked Gensler to provide lists of all no-action letters and exemption orders that the SEC issued, referring to cryptocurrencies, tokens or digital assets. He is also seeking lists of all enforcement actions and of any guidelines that the regulator might have released on the topic since January 1.
These lists, Grant thought, would help everyone see which way the SEC was leaning.
The letter comes hot on the heels of a Senate hearing which placed the SEC’s approach to crypto-regulation in the spotlight.
Toomey then criticized the SEC for keeping its internal analysis of crypto-assets private and for leaving businesses in the dark about the circumstances in which they might find themselves caught up in enforcement actions.
Even some of the SEC commissioners have criticised this approach.
Republican SEC commissioners Hester Peirce and Elad Roisman have previously stated in a case against UK-based Coinschedule that they were “disappointed” that the SEC did not explain which digital assets involved in the case were securities, “an omission which is symptomatic of our reluctance to provide additional guidance about how to determine whether a token is being sold as part of a securities offering or which tokens are securities.”
The SEC has emerged as the most assertive enforcer in the crypto-space because it has opened more than 75 enforcement cases against crypto-firms. The one that has attracted the most attention from the financial services industry has been the lawsuit against Ripple, the virtual currency exchange licensed in New York, which alleges that the company’s token, which it sold throughout a period of seven years, was a security.
Earlier in August, with an eye to framing legislation in future, Toomey asked the public to send him ideas and legislative proposals concerning cryptocurrency and blockchain technology.
