On Tuesday, Securities and Exchange Commission (SEC) Chairman Gary Gensler testified before the House Financial Services Committee about the SEC’s recent enforcement actions against the crypto business.
The chair was challenged for clarification on how he distinguishes between crypto securities and crypto commodities, as well as current obstacles for crypto companies in accessing financial services.
Committee head Patrick McHenry stated in his opening speech that Gensler and this year’s exchange commission had initiated “nearly 50 separate enforcement actions against digital asset firms.” The agency intends to boost enforcement with a $78 million budget proposal. He went on to say that Gensler has declined to clarify whether digital assets sold as part of an investment contract are subject to securities regulations, and, more crucially, how corporations should comply with those rules.
Gensler has previously stated and interviewed that the vast majority of crypto assets are securities, only expressly recognizing Bitcoin as a commodity. Aside from the largest cryptocurrency, he has hesitated to mention names, even avoiding a straight answer concerning Ethereum’s categorization.
The same thing happened at the hearing on Tuesday. When questioned if Ether was a commodity or a security by McHenry, Gensler simply answered, “the clarity is there, the law is clear and explicit.”
When asked to decide whether a digital asset is a security or not, Gensler typically refers to the Howey Test. According to the criteria, a financial asset issued to raise funds with the prospect of return based on the efforts of others qualifies as a “investment contract.”
Gary Gensler Questioned About Regulatory Actions
On enforcement activities, Minnesota Representative Tom Emmer posed a series of rapid-fire questions about the increasingly unfriendly financial and regulatory environment that crypto companies face in the United States. While Gary Gensler resisted giving short and clear answers, Emmer said that the SEC played a part in making it more difficult for crypto businesses to operate in the nation.
Emmer also chastised Gary Gensler for allowing the multibillion-dollar Terra and FTX collapses to occur while he was in charge. Last year, the congressman said that the SEC gave FTX “special treatment” that other corporations were not aware of.