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Calling Gary Gensler the most “destructive” and “lawless” chair in SEC history, U.S. Congressman Tom Emmer attacked him during a Sept. 24 House Financial Services Committee hearing. Emmer attacked Gensler for coining the term crypto asset security, charging him with basing his harsh enforcement against the crypto sector on it. Emmer underlined that Gensler never gave clear direction on the meaning and that no legislation contain the term. SEC lawyers secretly removed the phrase from a court footnote last week.
“You invented the term crypto asset security…” Emmer replied, “You never offered any interpretive direction,” adding that Gensler’s contradictions have compromised the American banking system.
Criticism Over Debt Box Case
Emmer also asked Gensler on how the SEC handled the Debt Box case, in which the agency sued a cryptocurrency business for purportedly $50 million scam. The matter was dropped, and the SEC was directed to reimbursements of $1.8 million in fees. Emmer furthest his control-by- Enforcement goal by accusing the SEC of creating falsehoods to fit Gensler’s anti-crypto posture.
Gensler said, “the matters in that case were not well handled.”
SEC Commissioner Peirce Backs Emmer
Known for her pro-crypto attitude, SEC Commissioner Hester Peirce concurred with Emmer’s worries and attacked the way the word crypto asset security was used by the agency. Peirce noted that the SEC just now admitted, via a court footnote, that the token itself is not a security – a realization she said should have come much earlier.
“We’ve fallen on our duty as a regulator not to be precise,” Peirce added, implying Congress should help define crypto coins’ applicability to securities rules.
SAB 121 Debate Continues
The hearing also went over the contentious Staff Accounting Bulletin No. 121 (SAB 121), which mandates that firms using cryptocurrency document those assets as liabilities on their balance sheets. Gensler defended the rule despite bipartisan calls to revoke it, saying, “It’s a good accounting bulletin,” adding it helps businesses understand the risks connected with owning crypto assets.
Rep. Wiley Nickel said that by depriving U.S. banks of safe custody of crypto products, so rendering the crypto ecosystem “less safe” and perhaps generating concentration issues by so transferring control to non-bank companies. Nickel also attacked the SEC’s choice to omit Bank of New York Mellon from the obligation for balance sheet reporting.
Gensler emphasized that although Nickel claimed inconsistent execution of SAB 121, the regulations are the same for everyone.
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