US Senator Demands Clarity and Sanity from the SEC Over Crypto Enforcement
It’s a shame that US Senator Pat Toomey (R-PA) is retiring because he seems the rare type in Washington who gets not only what is happening in the crypto industry, but also what needs to happen
The ranking Republican on the Senate Banking Committee is going hard against SEC Chair Gary Gensler, accusing the federal regulator of both acting when he shouldn’t act, and not acting when it would benefit investors.
“Had the SEC responded to calls for clarity on how it would apply existing securities laws to novel digital assets and services, things could have been different,” Toomey wrote in a letter to SEC Chair Gary Gensler. “Companies could have adjusted product offerings accordingly, preventing investor losses today, and the SEC would have been free to focus enforcement efforts on the worst actors.”
“Toomey referenced firms that ‘often promised enormous, seemingly unsustainable interest rates to depositors, and at least one business allegedly engaged in risky practices,’ and he further singled out Celsius’ lending that left billions of dollars of customer funds in limbo. Despite requests from the senator and other lawmakers — and crypto firms themselves — the SEC has declined to offer sufficient clarity about what digital assets meet the definition of securities, Toomey said in the Tuesday letter.”
Gensler, who has refused to provide any clear guidance, said the crypto industry should rely on vague legal precedent, and assume that “most digital tokens are securities” and that “the exchanges where they’re traded should register” with the SEC.
Toomey has been a crypto ally, pounding on the SEC on enforcement-related questions and demanding details about how it is applying the Howey Test to tokens.
Toomey’s letter says he wants answers for the crypto industry by Aug. 9:
“In May, the senator made a different argument that crypto firms should be allowed to collapse and that firms melting down is a natural part of the financial system.
“’It’ll probably take some failures in this space in order for the market to figure out what works,’ he’d said as algorithmic stablecoin terraUSD (UST) floundered.”
Toomey has also previously cautioned against aggressive investor-protection moves by the SEC. Last year, in defense of digital trading technologies, the lawmaker urged the agency “to proceed cautiously and avoid the temptation to pursue paternalistic regulations that restrict investor freedom under the guise of investor protection.”
Lawmakers and regulators could take a solid lesson from this kind of laissez-faire approach.