In a letter sent to the Securities and Exchange Commission (SEC) on July 18, 2023, a bipartisan group of 12 US lawmakers expressed their concerns about the agency’s stance on crypto regulation and urged it to adopt a more balanced and innovation-friendly approach.
The letter, which was signed by representatives from both the House Financial Services Committee and the House Energy and Commerce Committee, highlighted the potential benefits of crypto innovation for the US economy and national security, as well as the risks of falling behind other countries that are more supportive of the emerging industry.
The lawmakers argued that the SEC’s current approach, which relies on applying existing securities laws to crypto assets, is inadequate and inconsistent, creating uncertainty and confusion for market participants and hindering innovation. They cited several examples of the SEC’s actions that they deemed problematic, such as:
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The SEC’s lawsuit against Ripple Labs, which alleges that the company’s XRP token is an unregistered security, despite the fact that other regulators, such as the Department of Justice and the Financial Crimes Enforcement Network, have treated XRP as a currency.
Crypto regulation by enforcement had a dreadful day in court.
In light of the SDNY’s landmark decision in the Ripple case, @SECGov must reassess its reckless regulatory assault on the crypto industry.
My letter to Chair Gensler: pic.twitter.com/Mrk63N4KhH
— Rep. Ritchie Torres (@RepRitchie) July 18, 2023
The SEC’s delay in approving a Bitcoin exchange-traded fund (ETF), which has resulted in US investors missing out on the opportunity to access the crypto market in a regulated and transparent manner, while Canada and other countries have already approved several Bitcoin ETFs.
The SEC’s lack of clear guidance on how to determine whether a crypto asset is a security or not, which has led to inconsistent enforcement actions and deterred many projects from launching or operating in the US.
The SEC’s refusal to engage with the crypto industry and provide regulatory clarity, despite repeated requests from lawmakers, industry leaders, and investors. The letter urged the SEC to reconsider its approach and adopt a more constructive and collaborative attitude towards crypto regulation. The lawmakers suggested that the SEC should:
Work with other regulators, such as the Commodity Futures Trading Commission (CFTC) and the Office of the Comptroller of the Currency (OCC), to establish a coordinated and coherent regulatory framework for crypto assets. Provide clear and timely guidance on how to classify and regulate different types of crypto assets, based on their functionality and characteristics, rather than applying a one-size-fits-all approach.
Foster innovation and competition in the crypto space by creating a safe harbor or sandbox program for emerging projects that comply with certain standards and best practices. Engage with the crypto industry and stakeholders in a constructive and transparent manner, by holding regular meetings, hearings, workshops, and consultations.
The letter concluded by stating that the lawmakers are ready to work with the SEC and other regulators to ensure that the US remains a global leader in crypto innovation, while protecting investors and consumers. They also expressed their hope that the SEC will respond to their letter within 30 days and provide an update on its plans and actions regarding crypto regulation.