SEC Chair Gary Gensler will be in the hot seat on Tuesday, the star witness before the full U.S. House Committee on Financial Services on the topic of "Oversight of the Securities and Exchange Commission." The next day, the Subcommittee on Digital Assets, Financial Technology and Inclusion will take up draft legislation relating to stablecoins.
On the regulatory front, Gensler has found himself again under fire from within his own agency, with SEC Commissioner Hester Peirce on Friday filing a robust dissent against Gensler's latest policy move, which changes the statutory definition of a securities exchange to include cryptocurrency and digital asset exchanges.
Gensler said amendments to the definition of “exchange” under the federal Exchange Act Rule are necessary to address platforms that trade crypto asset securities, including "so-called 'DeFi' systems," asserting that "many crypto trading platforms already come under the current definition of an exchange."
Pierce titled her rebuttal, "Rendering Innovation Kaput."
"Rather than embracing the promise of new technology as we have done in the past, here we propose to embrace stagnation, force centralization, urge expatriation, and welcome extinction of new technology," Pierce wrote, going as far as to say the SEC's release "undermines fundamental First Amendment protections."
The dispute over the definition of an exchange is only one of the items on the Financial Services Committee agenda, however.
"This hearing will examine the regulatory developments, rulemakings, and activities that the SEC has undertaken in the period since the last hearing on October 5, 2021," explained the committee majority staff, including the definition change that "potentially [expands] the SEC’s authority over digital asset trading platforms."
Also on the docket, a SEC declaration from last March calling on digital asset custodians to change the way they report liabilities and assets—which some lawmakers said increased potential losses. The committee will also revisit a SEC proposal made in February that called for registered investment advisors to include Bitcoin holdings among other assets held by "qualified custodians."
“In what is becoming something of a habit, the Commission is once more proposing to dictate contract provisions involving entities the Commission does not regulate,” Peirce said at the time. “The Commission does not have authority to regulate custodians directly, but we propose to regulate them indirectly."
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