The U.S. House Financial Services Committee Challenges SEC Oversight of Crypto Industry
The U.S. Securities and Exchange Commission (SEC) is facing increasing pressure to limit its control over the crypto industry, with calls coming from both inside and outside the House. The House Financial Services Committee recently voted to challenge Staff Accounting Bill 121, which has been used since March 2022 to prevent banks from acting as custodians of digital assets. The SEC initially argued that this measure would protect against the risks associated with safeguarding crypto assets. However, committee members have criticized the way SAB 121 was enacted, claiming that the SEC did not consult with experts on regulating bank custody.
In October, a Government Accountability Office report also criticized the enactment of SAB 121, as it was implemented without submitting a report to Congress and has been used as a substitute for comprehensive regulatory guidance. The purpose of this guidance was to protect investors from the mishandling of customer crypto assets by custodians, which was evident in FTX’s collapse when billions of crypto assets went missing. Representative Maxine Waters highlighted this during the House committee meeting.
SEC Accused of Exceeding Its Authority
In addition to the House committee’s challenge, eleven state attorneys general filed a joint amicus brief opposing the SEC’s authority over crypto firms in its lawsuit against Payward Ventures, the parent company of Kraken crypto exchange. The attorneys argue that the SEC’s enforcement action goes beyond its delegated powers and that categorizing crypto assets as securities without an investment contract is inappropriate. They claim that this unauthorized exercise of authority puts state consumers at risk by preempting state statutes that are better suited to addressing the specific risks associated with non-securities products.
The amicus brief was submitted by attorneys general from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota, and Texas.
SEC Commissioner Hester Peirce also criticized the regulator’s approach during an ETHDenver event. She stated that the SEC has been solely focused on enforcement, which has created concerns among developers about how to build new technology without attracting legal action. Peirce believes that clearer rules would enable developers to concentrate on innovation without the constant fear of being sued.
Hot Take: Calls for SEC to Reduce Oversight of Crypto Industry
The U.S. Securities and Exchange Commission (SEC) is facing mounting pressure to curtail its oversight of the crypto industry. The House Financial Services Committee recently voted against Staff Accounting Bill 121, which has restricted banks from acting as custodians of digital assets since March 2022. Critics argue that the SEC did not consult with experts on bank custody regulations when implementing this measure. Additionally, a Government Accountability Office report highlighted concerns over the lack of regulatory guidance provided by SAB 121.
Furthermore, eleven state attorneys general have filed a joint amicus brief challenging the SEC’s authority over crypto firms in its lawsuit against Payward Ventures. They argue that the SEC’s enforcement actions exceed its delegated powers and that categorizing crypto assets as securities without an investment contract is inappropriate.
SEC Commissioner Hester Peirce has also expressed her dissatisfaction with the regulator’s enforcement-focused approach. She believes that clearer rules would provide developers with more certainty and enable them to focus on building innovative technologies without the constant fear of legal repercussions.
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