Today, commencing shortly, SEC Chair Gary Gensler will testify in front of the House Financial Services Committee. You can expect a good grilling of Chair Gensler as the Republic-controlled Committee has pushed against his aggressive rule-making agenda that has propelled the SEC into the Climate debate, and undermined the digital asset sector while plotting a highly political path that may impact capital formation for private firms.
In regard to crypto, Gensler has taken an approach of regulation by enforcement, skipping an opportunity to be recognized as a transformational leader by pursuing a more nuanced compliance approach for the easy path that all digital assets are securities. To quote the Chair:
“There is nothing about the crypto asset securities markets that suggests that investors and issuers are less deserving of the protections of our securities laws. Congress could have said in 1933 or in 1934 that the securities laws applied only to stocks and bonds. Yet Congress included a long list of 30-plus items in the definition of a security, including the term “investment contract.” As I’ve previously said, without prejudging any one token, the vast majority of crypto tokens likely meet the investment contract test. Given that most crypto tokens are subject to the securities laws, it follows that most crypto intermediaries have to comply with securities laws as well.”
As for his ESG juggernaut, Chair Gensler packages the SEC’s extension into the climate debate as the Commission not having any role in climate risk and then quickly contradicting himself, claiming climate disclosure is needed so investors can make better decisions. Of course, this path will saddle public as well as private firms with greater cost – something that will be passed onto consumers, undermining economic activity.
The Hearing memo outlines a litany of issues you may expect the Committee to address. The prepared testimony, which is the extended version of what Chair Gensler will present at the beginning of the hearing, is available below.
The hearing may be watched on the Committee’s website, scheduled to commence at 10 AM today (September 27, 2023).
