Hill Delivers Remarks at Hearing to Break Down the SEC’s Politicized Approach to Digital Assets
Washington,
September 18, 2024 -
Today, the House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion, led by Chairman French Hill (AR-02), is holding a hearing entitled “Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Assets.”
Watch Chairman Hill’s opening remarks here.
Read Chairman Hill’s opening remarks as delivered:
“Welcome to this important bookend to our digital asset work for this Congress in the 118th session of the Congress.
“I’ve been privileged to lead the Digital Asset Subcommittee, which was established only last year but has already made history legislatively with the Clarity for Payment Stablecoins Act and our fit for purpose regulatory framework bill, FIT21.
“Despite this legislative progress on a bipartisan basis, we’ve been troubled by the fact that the SEC as chaired by Chairman Gensler has instead chosen to front-end the work of Congress and insert politics instead of being an independent regulator.
“He even took the unusual step of releasing his own statement opposing FIT21 on the morning of the House vote, despite refusing to provide technical assistance as requested by the Committee—and I might add, in contrast to the Biden White House, which did not issue a veto statement on that bill.
“With over 70 Democrats voting ‘Yes’ on the bill just hours later, it’s clear that Chairman Gensler is stuck on an island of his own making.
“The Commission has a statutory mandate to protect investors; maintain fair, orderly and efficient markets; and facilitate capital formation.
“Instead of providing legal clarity so that those who want to follow the law can do so, the Gensler SEC’s approach has injected even more confusion and uncertainty into the markets and for market participants and consumers alike. How is this protecting the public?
“Whether it’s through politicized enforcement actions or by refusing to share its analysis around the legal classification of digital assets, the SEC has created a ‘lose-lose-lose’ situation for consumers, founders, investors, and everyone in between.
“On one hand, the agency has pursued enforcement cases against companies for activities that were not clearly defined as securities violations, leaving investors and businesses in a heightened state of uncertainty.
“On the other, the SEC's proposed rulemakings and guidance have often been overly broad and difficult and frequently impossible to implement for digital asset market participants.
“At best, these rules fail to provide any clarity on how to comply with the law, while imposing significant compliance burdens on digital asset firms that don’t make a lot of sense. In other words, not fit for purpose.
“At worst, they represent a de facto ban on the use of digital assets and blockchain technology in the United States.
“Nowhere has the SEC’s prejudice against digital assets been more apparent than in the Staff Accounting Bulletin 121, which upends decades of legal precedent in the custody business and creates an impenetrable hurdle for those financial institutions seeking to provide digital asset custody services for their clients—particularly banks and bank trust departments that have the authority, the talent, and the compliance procedures to do just that.
“This kind of politicized, unworkable, and inconsistent approach by Chairman Gensler has made it challenging for businesses to operate in the United States and has driven many in the blockchain community not to write more letters of complaint to the SEC, but to buy plane tickets, make hotel reservations, and make lease decisions for Singapore, the United Kingdom, and the EU.
“One report estimates that the U.S. has lost around 14% of blockchain developers since 2018.
“Even the SEC’s approval of Exchange Traded Products for Bitcoin and Ether earlier this year only happened because Chairman Gensler tried to overplay his hand but could no longer explain to the courts why the SEC approved Bitcoin futures ETFs but not the proposed spot Bitcoin products.
“While this was a positive development, it took countless hours of manpower, millions of dollars in legal fees, and a full SEC face plant in the D.C. Court of Appeals to achieve.
“Important questions still remain about the precedent that that sets for future Commissions to follow.
“I’d like to close by reiterating that the pro-FIT21 and pro-regulatory framework views of the majority and many bipartisan does not mean we’re against the SEC going after bad actors or modernizing existing rules to incorporate digital asset securities and other unique instruments.
“We’re against SEC enforcement abuse and making it hard for legitimate actors who are trying to follow the rules to do a fine job and bring innovation and technology to our markets.
“I want to thank our witnesses for being with us here today, and I look forward to your testimonies.”
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