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The U.S. Securities and Exchange Commission (SEC) has recently come under intense scrutiny from lawmakers and industry leaders alike for its handling of cryptocurrency regulation, begging the question of whether the agency is exceeding its authority in its attempts to rein in the industry. On Wednesday, Representatives French Hill (R-Ark.) and Dusty Johnson (R-S.D.), two prominent Republican members of the U.S. House of Representatives, voiced their concerns about the SEC\u2019s approach in a letter addressed to the body\u2019s Chair, Gary Gensler. <\/p>\n
\u201cWhile Congress works to close regulatory gaps, the SEC has opted to regulate by enforcement,\u201d the letter read. \u201cIn fact, Financial Services Committee Republicans have sent numerous letters to the SEC expressing concern with several proposed rulemaking and staff actions. This approach does not ensure compliance and customer protection, but instead creates further confusion, demonstrated by the recent summary judgment.\u201d<\/p>\n
The lawmakers went on to express their belief that the regulator\u2019s actions were \u201cseemingly timed\u201d to overshadow and potentially derail efforts to draft comprehensive crypto legislation. Hill and Johnson argue that the confusion fostered by the SEC\u2019s current approach is evidenced by the recent legal battle between Ripple Labs and the SEC. Ripple\u2019s partial victory<\/a> in that case has, according to the SEC\u2019s critics, further highlighted the need for clear regulatory guidelines in the crypto sphere.<\/p>\n The fact that the SEC\u2019s lawsuits against leading crypto exchanges, Binance and Coinbase<\/a>, were initiated shortly after Republican chairs of two House committees unveiled a draft discussion on overhauling U.S. crypto regulations, could be what the lawmakers are alluding to by mentioning the timing in their letter.\u00a0With two bills introduced since 2021 and 15 hearings held in the last four years, Hill and Johnson believe that a legislative framework would be more effective in preventing future crypto business collapses than sporadic enforcement actions that only seek to punish after-the-fact.\u00a0<\/p>\n The SEC has incurred skepticism from both sides of the political aisle, however, with New York Democrat Ritchie Torres also voicing his criticisms of the SEC in an open letter<\/a> to Gary Gensler on July 18. In it, he praised Judge Annalisa Torres for her meticulous application of the Howey Test<\/a>, a legal standard used to identify securities, in the court\u2019s ruling on the SEC\u2019s lawsuit against Ripple Labs. Congressman Torres believes the agency has been inconsistent in its application of the Howey Test overall.<\/p>\nCriticism from both sides of the aisle<\/h2>\n