US lawmaker accuses SEC of ‘enforcement abuse’ against crypto firms

A Republican lawmaker chairing a House subcommittee overseeing digital assets heavily criticized the United States Securities and Exchange Commission (SEC) and its chair, Gary Gensler, for “insert[ing] politics” into regulating crypto firms.

In a Sept. 18 hearing of the House Subcommittee on Digital Assets, Financial Technology and Inclusion, Arkansas Representative French Hill claimed that Chair Gensler’s approach to digital assets had led to “confusion and uncertainty” in the markets. At the Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Assets hearing, the subcommittee chair suggested alternative regulatory routes for crypto, such as the Financial Innovation and Technology for the 21st Century (FIT21) Act currently moving through Congress.

“[…] 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,” said Rep. Hill. “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.”

‘Playing politics’ with crypto

Subcommittee ranking member Stephen Lynch, a Democrat, pushed back against the politicization claims at the SEC, citing millions of dollars from the crypto industry moving to support or oppose candidates for congressional elections in 2024. He hinted that the industry was orchestrating resistance to crypto regulation in Congress.

“If anyone is playing politics, it is the crypto industry,” said Rep. Lynch, adding:

“While most of the digital asset space has collapsed, it’s well known what remains is used to facilitate illicit finance or illegal activity.” 

Rep. Lynch pointed to Republican presidential nominee Donald Trump launching an “ill-conceived crypto venture” before the November election. He also suggested that US lawmakers had spent time arguing over legislation governing “a small sliver” of the financial sector instead of focusing on the potential benefits of the technology.

Related: House Republicans demand SEC’s Gensler clarify crypto airdrops stance

Former SEC commissioner Dan Gallagher, currently working at Robinhood, and former acting enforcement chief Michael Liftik testified at the congressional hearing. Gallagher called for Congress to step in with legislation to address the SEC’s “regulation by enforcement” approach to crypto — claiming it led to “inconsistency” in the industry. 

North Carolina Representative Wiley Nickel, a Democrat who has been a vocal advocate of digital assets in Congress, claimed Gensler was taking a “politicized” and “downright wrong” approach to crypto.

In July, the US lawmaker helped pen a letter to Democratic National Committee Chair Jaime Harrison. The letter suggested that Vice President Kamala Harris presented an opportunity to change the public perception that the political party held a “negative viewpoint on digital assets.”

“[Gensler is] hurting consumers, innovation, American competitiveness and the Democratic administration,” said Rep. Nickel at the hearing.

Lawmakers held the hearing 48 days before the US Election. Depending on the outcome, the leadership of the House Financial Services Committee and the digital assets subcommittee could stay in Republicans’ hands or move to the Democrats’ starting in 2025.

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