House Finacial Services Committee leaders have sent a letter to SEC Acting Chairman Mark Uyeda asking him to reverse harmful rules impacting crypto enacted during the Biden Administration.
Chairman of the Committee French Hill, Chairman of the Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence Bryan Steil, and Chairman of the Subcommittee on Capital Markets Ann Wagner say, “There is renewed hope that the SEC will turn a corner on its outwardly hostile stance toward the digital asset ecosystem.”
The trio notes that the SEC, under Uyeda’s guidance, has already taken material steps to move away from the anti-innovation Gensler era. At the same time, the Representatives believe additional action may be taken soon.
The letter outlines the following moves the Commission should take:
- On February 15, 2023, the SEC proposed “Safeguarding Advisory Client Assets,” which required that investment advisers with custody of digital assets maintain those assets with a “qualified custodian” while simultaneously casting doubt on the investment adviser’s ability to meet this requirement. In light of your characterization of this proposal as a “‘no-win’ scenario for crypto assets” and Commissioner Peirce’s assertion that the proposal “could leave investors in crypto assets more vulnerable to theft or fraud, not less,” we urge the SEC to cast this proposal aside and start fresh with any efforts to provide clarity regarding custody requirements for digital assets.
- On January 26, 2022, the SEC proposed “Amendments Regarding the Definition of ‘Exchange’ and Alternative Trading Systems (ATSs) That Trade U.S. Treasury and Agency Securities, National Market System (NMS) Stocks, and Other Securities.” Over a year later, the SEC reopened the proposal’s comment period and included supplemental information around its applicability to the digital asset ecosystem. Committee Republicans have consistently opposed this proposal, rejecting its attempt to shoehorn the digital asset ecosystem into rules for securities exchanges. This proposal threatens to subject decentralized finance protocols, and potentially even software developers, to the onerous regulations applicable to securities exchanges, without a legitimate pathway to compliance.
- [The Commission] should update the 2019 “Framework for Investment Contract Analysis of Digital Assets.” While the framework identifies several distinct factors and additional sub-factors that should be considered under the Howey test as it applies to digital assets, it fails to outline how the factors should be weighed, or the combination of factors that result in a digital asset being subject to securities laws.
The letter thanks the SEC for their early work and states they expect to support the SEC as they establish a clear legal framework for digital assets.