28th September 2023 – (Hong Kong) Gary Gensler, Chair of the U.S. Securities and Exchange Commission (SEC), remained combative against crypto “hucksters” during his testimony before the House Financial Services Committee on Wednesday. Gensler declined to address the industry’s pressing questions while asserting that digital asset companies have been recklessly handling customer assets.
In his remarks, Gensler continued his criticism of the way crypto firms manage customer funds, arguing that commingling assets has yielded unfavourable outcomes. He stated, “It’s a recipe that’s not led to good results.”
Regarding the SEC’s position on spot bitcoin exchange-traded funds (ETFs), Gensler acknowledged that the agency is still deliberating its response to a judge’s ruling that required them to reassess their stance. In August, a judge in the D.C. Circuit Court of Appeals deemed the SEC’s rejection of bitcoin ETF applications, such as the Grayscale Investments case, as “arbitrary and capricious.” However, Gensler did not disclose the agency’s next steps or provide a timeline for any potential actions.
While the hearing primarily focused on non-crypto matters, including the impending federal government shutdown and concerns about the SEC’s priorities, there was a noticeable partisan divide. Influential Democrats praised Gensler, while Republicans accused him of harming consumers and small businesses.
Rep. Patrick McHenry, the panel’s chairman, criticised the SEC’s “losing streak with the courts” and expressed concerns about the agency’s approach to the digital assets ecosystem, which he argued was causing confusion and lasting damage.
During the questioning, Gensler confirmed once again that bitcoin is not considered a security. However, he declined to answer a question about the SEC’s ongoing legal dispute with Ripple, citing the ongoing nature of the matter.
Gensler also mentioned that the SEC is preparing for a potential government shutdown, which would significantly reduce staffing levels by over 90%. This could result in a slowdown in the agency’s review and approval processes for SEC filings.
Gensler stressed the importance of addressing the issue of commingled assets in the crypto industry and suggested that if Congress were to take action, it would need to find a solution to separate such conflicts.
As the regulatory landscape surrounding cryptocurrencies continues to evolve, Gensler’s firm stance reflects the SEC’s commitment to protecting investors and ensuring the integrity of the market. The industry awaits further developments and guidance from the SEC regarding its approach to digital assets.