Republican representatives Patrick McHenry and Bill Huizenga have expressed worry with the Securities and Exchange Commission (SEC) chair Gary Gensler in their latest public letter.
Earlier in March, eight members of the Congressional Blockchain Caucus had also questioned the SEC’s clampdown on the crypto industry.
This time, the leaders in the House Financial Services Committee questioned the SEC’s proposed changes to the definition of “exchange” and that of “dealer” in two separate proposals from earlier this year. They stated that the changes could stunt the growth of the crypto sector and decentralized finance.
Crypto growth under SEC’s jurisdiction
McHenry and Huizenga argued, “We are particularly concerned the proposed rules can be interpreted to expand the SEC’s jurisdiction beyond its existing statutory authority to regulate market participants in the digital asset ecosystem, including in decentralized finance (DeFi).”
They essentially highlighted the SEC’s January proposal that took an expansive view of entities marked as exchanges. The officials worry that this change could mark “a step that exceeds the SEC’s statutory authority.” The other proposal concerns the regulator’s March rule that defined “as a part of regular business” under a “dealer.”
As part of the major concerns, the letter stated, “The SEC’s analysis in both proposals is insufficient to justify such proposed changes.”
In addition, they commented that the agency’s analysis fails to fully define the scope of the impacted market participants and stalls sufficient details on the cost of compliance. Further highlighting that “the rulemakings fail to define the SEC’s statutory authority.”
CFTC vs SEC
The questions around the SEC’s regulatory authority have been floating since the commodities regulator CFTC entered the domain. Back in February, CFTC Chairman Rostin Behnam had appealed for more powers to regulate the cryptocurrency spot market in his testimony before the Senate Agriculture Committee (SAC).
Then in March, Senators Kirsten Gillibrand and Cynthia Lummis pushed for legislation that handed over a part of crypto oversight to the Commodity Futures Trading Commission.
Previously, U.S. Securities and Exchange Commissioner Hester Peirce had said in an interview with Bloomberg that crypto might need a multi-regulatory oversight. She had stated, “The SEC has experience regulating retail markets. The CFTC has experience regulating futures markets. And, then the banking regulators obviously have experience.”
However, through the current letter, the office-holders have called to the securities watchdog to provide public comment on all rulemakings. They have also asked to “re-propose” the above-mentioned rules.
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