US lawmaker invokes SEC lawsuits in considering crypto regulatory framework

Members of the U.S. House Financial Services Committee convened to debate the need for greater transparency in the digital asset sector, with some citing the Securities and Exchange Commission’s (SEC) recent legal action against crypto companies as an example.

At a June 13 hearing of the committee, Ranking Member Maxine Waters stated that Democrats were giving a “careful and reflective examination” to the proposed framework put forward by Republicans concerning the regulation of digital assets. Chair Patrick McHenry expressed his anticipation that both parties would provide input on a draft bill, with revisions to be made after a congressional recess in July.

Waters warned that if there was not a thorough investigation and cooperation between the two political parties, the digital asset laws could potentially lead to fraudulent activity and misuse of customer funds. She referred to the fall of FTX, the criminal charges against former FTX CEO Sam Bankman-Fried, and the SEC’s recent actions against Binance and Coinbase.

Congresswoman Waters expressed her concerns that the Republican legislation would permit crypto companies, which are currently facing legal action for breaching securities regulations, to persist in their activities through provisional registration. She further commented that this bill appears to block the SEC from taking any enforcement action against crypto firms, even if they have committed fraud, thereby granting those who have acted inappropriately a ‘get out of jail free’ card and enabling them to continue to cause harm to consumers and investors.

The draft bill presented on June 2 would stop the SEC from refusing digital asset trading platforms from registering as a regulated alternative trading system and permit them to provide “digital commodities and payment stablecoins.” It would also reassign the roles the SEC and Commodity Futures Trading Commission take on in regulating digital assets in the United States.

“When it came to FTX, Binance and Coinbase, the American public were the ones who bore the brunt of the violations or alleged violations,” Aaron Kaplan, founder and co-CEO of Prometheum, stated at the hearing. “The most reasonable and sensible approach is to apply federal securities laws [through the SEC].”

US Senator renews efforts for crypto regulation in light of SEC lawsuits.

Other legislators have reacted differently to the SEC’s apparent strategy of regulation through enforcement. On June 12, Rep. Warren Davidson of Ohio – a Republican who is also on the House Financial Services Committee – proposed that Gary Gensler be dismissed from his role as SEC Chair, and that the commission’s authority be reorganized, through a piece of legislation. It is not certain whether such a move would be lawful.

Amid the SEC lawsuits, Binance.US has resisted the commission’s attempts to freeze its funds. As of the time of writing, a federal judge in Washington D.C. is deliberating on conflicting motions from the SEC, Binance, and Binance.US regarding how to manage the resources and other legal matters.

Does SEC Chair Gary Gensler have the ultimate authority when it comes to crypto regulation?

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