SEC head confirms the regulator has no power to ban crypto

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The head of the Securities and Exchange Commission (SEC), Gary Gensler, has confirmed to Congress his department has no power to prohibit cryptocurrency.

“Prohibiting” crypto “does not fall within the scope of the SEC’s duty.”

Gensler said during a House Committee on Financial Services hearing on Oct. 5, adding: “That would be up to Congress.”

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“It’s a question of how we get this field under investor consumer protection. How we work with bank regulators and others to ensure that the Treasury department has it covered.”

“Many of these tokens are undoubtedly investment contracts, notes, or securities,” he said. “We must bring crypto within the SEC’s investor protection remit.”

“The stability issues that stablecoins may pose” is a “top priority.” according to SEC head

During a hearing on Capitol Hill, Representative Patrick McHenry blasted the actions and attitude of the SEC under Gensler’s leadership. McHenry claimed SEC had neglected to follow the “long-held practice of noting comment on rulemaking and procedures.”

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“Some of your statements have raised concerns in the marketplace and made things less than clear. You’ve made off-the-cuff remarks that move markets, disregarded rulemaking by putting out a statement without proper process; and essentially run roughshod over American investors.”

The administrative procedures act is what the SEC follows, according to Gensler.

In his letter, Mulhauser also pointed to statements made by Gensler while he was a guest lecturer at MIT in 2019, when he criticized previous SEC rulings classifying Bitcoin and Ether as commodities.

Gensler was asked about his current thoughts on the issue, and he replied, “I’m not going to get into any specific token, but I believe that the securities laws are quite clear: if you’re raising money… The investing public has a reasonable expectation of earnings based on the efforts of others.

On the same day, McHenry submitted a bill that would codify and expand the current safe harbor for digital tokens. On February 27, 2020, Commissioner Peirce proposed a framework for regulating blockchain technologies, which includes many points identical to those in the pro-crypto SEC commissioner’s proposal outlined in February 2020.

During the hearing, McHenry questioned Gensler whether he had taken the time to examine Peirce’s plan. While Gensler avoided answering whether he had read Peirce’s proposal in detail:

“Commissioner Peirce and I have discussed her idea for a safe harbor. I think the problem for the American public is that if we don’t regulate it and provide investor protection, people will be harmed.”

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