This was a week to remember for crypto industry regulation.
On Tuesday April 18, 2023, the US House Financial Services Committee conducted a Hearing Entitled: Oversight of the Securities and Exchange Commission with SEC Chair Gary Gensler in the hot seat. During this hearing, it became abundantly clear that the SEC was purposely not doing anything new to update their rules pertaining to crypto regulation, while they were rushing with 48-52 ruling updates, as I already pointed out in a previous post,US Policy on Cryptocurrency Is Lopsided: It is Solely Focused on Mitigating Risks while Suffocating Innovation, Leadership and Growth. The SEC continue to firmly believe that the industry must fit its square pegs into its round holes.
As expected, the Democrats praised Gary Gensler and threw him soft ball questions.
Unsurprisingly, the notable Congressmen that skewered Chairman Gensler the most were Reps. Patrick McHenry, Tom Emmer, and Warren Davidson. To add to this wonderful trio, a newcomer, Rep. Byron Donalds delivered a final coup de grâce that summed it up.
The other takeaway is that the SEC didn’t seem to care if they were pushing the crypto industry outside of the US. Sure enough, two days later, Coinbase and Gemini announced they were setting-up offshore operations.
It was a terrible day, if you were in Gary Gensler’s shoes, despite his cavalier attitude during that marathon hearing.
On Wednesday April 19, 2023, the US House Subcommittee on Digital Assets, Financial Technology, and Inclusion conducted another Hearing Entitled: Understanding Stablecoins’ Role in Payments and the Need for Legislation.
Contrasted with the fireworks-heavy preceding day, that hearing was a bit of a whimper. Democrats were wishy-washy on supporting stablecoins. Rep. Maxine Waters had the audacity to declare that we “are starting from scratch”, a very sad statement that typified how politics can quickly lead to a stalemate when each side digs deeper into its own positions. Sadly, that Hearing was short, and ended in a status quo situation despite the fact that many in the crypto industry had high hopes for seeing stablecoin-related legislation be the first to get passed, given the many months of preparations.
Thankfully, the European Union saved the week, with something tangible. Almost three years in the making, the Markets in Crypto-Assets Regulation (MiCA) was passed by the European Parliament. Although not perfect, it did usher clarity and an willingness to fold crypto into the traditional financial system. Clearly, the EU doesn’t want crypto to be an outlier. This was a good step in the right direction, especially when contrasted with the US policy of trying to keep crypto outside of the financial system while tightening the noose on it.
Former SEC Chair Jay Clayton said it well this morning on CNBC.
But why wasn’t he so hawkish and effective as the SEC Chair for four years?
Next week, another new Hearing was just announced by Rep. Patrick McHenry, entitled: “The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure”.
Indeed, the gaps are getting wider, with each passing day that the SEC continues on its current path of crypto exclusion. Rumors has it that Senator Elizabeth Warren also has something planned.
Republicans appear to have the upper hand in terms of increasing the heat on the SEC.
Two questions remain:
Can the US Congress move fast and pass at least one piece of legislation to put the breaks on the SEC’s damaging path?
Can the US House of Representatives oust Gary Gensler as Rep. Davidson seems to be determined to do when he introduces his awaited legislation hopefully next month?
This movie will surely have multiple future seasons and episodes, but the US spectators are getting tired of being taken around in circles.