When Gary Gensler’s Securities and Exchange Commission (SEC) this week filed securities charges against America’s biggest cryptocurrency exchange, they were premised on a single core idea: that U.S. law already includes the necessary tools to regulate cryptocurrency assets and marketplaces, said Gensler, an appointee of the Biden administration. However, legislators from both the House and Senate, and belonging to both political parties, seem to disagree.
A series of recent bills show the legislative branch actively engaged in lawmaking around crypto, including the Digital Asset Market Structure and Investor Protection Act, which has some truly excellent provisions, including a safe harbor for non-security cryptos under $75 million market-cap, and for limited sales to non-accredited investors. It also aims to clarify registration procedures for crypto exchanges, and even includes a plan for progressive decentralization that would allow assets to transition from security to commodity status over time.
The existence of this process could undermine the SEC’s current round of enforcement actions, particularly the case against Coinbase. Senator Cynthia Lummis (R-WY) told The Block that she and Senator Kirsten Gillibrand (D-NY) are holding the reintroduction of their own crypto regulation bill to see how things go in the House. This could rise to the level of violating a 1946 law called the Administrative Procedures Act (APA). The APA was crafted, over more than a decade, in an attempt to reconcile the growing administrative state with democratic principles.
On Wednesday, Robinhood officials testified that they had spent 16 months working with the SEC to register the company’s crypto sales service as a special-purpose digital asset broker-dealer. According to their counsel, a former SEC commissioner himself, they were pretty summarily told in March… that we would not see any fruits of that effort. This suggests that Gary Gensler’s SEC is attempting to sneak past a bipartisan process unfolding across the House and Senate, and may be overstepping its moral authority.
The preponderance of evidence suggests Gensler’s real goal is to effectively ban crypto in the U.S. It will be up to the courts to determine the legalities.