Congressman Tom Emmer distributed a series of Tweets this past week that is emblematic of the frustration pertaining to the digital asset industry and a recalcitrant Securities and Exchange Commission when it comes to fostering a productive regulatory environment. Included in the Tweets, the Congressman shared a copy of a bi-partisan letter sent to the SEC regarding the “SEC’s crypto information seeking process.”
Emmer stated: “My office has received numerous tips from crypto and blockchain firms that SEC Chair [Gary Gensler’s] information reporting “requests” to the crypto community are overburdensome, don’t feel particularly… voluntary… and are stifling innovation.”
The SEC has long encouraged Fintech innovators to reach out to them regarding projects of which they may have regulatory questions. It seems the strategy has now transitioned to slowing innovation with excessive information requests. While the SEC is hesitant to issue any type of statement supportive of innovation, recent industry chatter collaborates Emmer’s assertion that the SEC is undermining digital asset innovation, impeding crypto firms that desire clear rules that have been slow to emerge.
This is why I sent a bipartisan letter today to SEC Chair @GaryGensler with @RepDarrenSoto, @WarrenDavidson, @RepAuchincloss, @RepDonaldsPress, @RepJoshG, @RepTedBudd, and @RepRitchie regarding the SEC’s crypto information seeking process. pic.twitter.com/8HcTgZA0XL
— Tom Emmer (@GOPMajorityWhip) March 16, 2022
The bipartisan letter sent to the SEC expresses the opinion that “while the SEC has authority to obtain info from market participants for rulemaking purposes, it must ensure that these inquiries don’t infringe on the standards established in the Paperwork Reduction Act, which limits the burden the govt. imposes on private businesses & citizens.”
“Crypto startups must not be weighed down by extra-jurisdictional and burdensome reporting requirements. The SEC must ensure that its information-seeking requests to private crypto and blockchain firms are not overburdensome, unnecessary, and do not stifle innovation,” stated Emmer.
In brief, death by bureaucracy used to cloak a mission that seeks to undermine digital asset firms which may be pushing the boundaries of existing securities law. The SEC appears to be taking a two-pronged approach to stymie crypto innovators, crushing paperwork augmented by enforcement actions. SEC civil lawsuits have been used as a cudgel to hammer digital asset firms into line, regardless of the intent of a targeted business.
A report from last November by Reuters pointed to the Gensler Commission as embracing “regulation by enforcement.” When you don’t want to create bright-line rules, enforcement actions are a shortcut to the hard work necessary to create a workable environment for the digital asset ecosystem. Gensler explained away his proclivity for enforcement actions minus bespoke rules in a rather cavalier way:
“Some market participants may call this ‘regulation by enforcement.’ I just call it ‘enforcement.’”
