US senator attacks SEC’s digital asset regulatory approach

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The U.S. Securities and Exchange Commission (SEC) must do better in its regulatory approach towards digital assets and issue clear guidelines to the industry, a U.S. lawmaker stated in a letter criticizing the Gary Gensler-led agency.

U.S. Senator John Hickenlooper (D-Colo.) wrote to Gensler on October 13, calling out the agency for failing to issue definitive regulations for the digital asset industry.

“I write to urge the SEC to issue regulations for digital asset securities through a transparent notice-and-comment regulatory process,” he stated.

Over the past few years, the agency has been called out for its “regulation by enforcement” approach. This criticism has done little to slow down the agency, with Gensler picking up from where his predecessor Jay Clayton stopped. Gensler is still pursuing Ripple, a lawsuit Clayton first filed, and has charged several other companies and individuals he believes to be violating securities laws.

Gensler has consistently claimed that the digital asset industry is well-regulated. Just two weeks ago, he reiterated that the SEC has jurisdiction over most tokens as they are securities.

“The law is clear on this. I believe based on the facts and circumstances, most of these tokens are securities,” Gensler told CNBC.

The senator disagrees, noting in his letter that “…existing laws and regulations were not designed to deal with how digital assets are being used in the market.”

“Applying the old rules to the new market could inadvertently cause financial services to be more expensive, less accessible, and the SEC’s disclosure regime to be less useful to the American people,” he added.

Senator Hickenlooper believes that while some digital assets may be securities, others are commodities, and some don’t fit either category. He wants the SEC to clarify what types of digital assets are securities and issue guidelines on how to list and issue digital securities.

The watchdog must also establish a registration regime for digital asset security trading platforms and set rules on trading and custody. Senator Hickenlooper called on the SEC to engage the public in formulating these regulations.

While the legislator believes that some digital assets are securities and others are commodities—as do many in the Bitcoin industry—Gensler believes that only BTC is exempt from being a security.

In line with the famous 2018 speech by Bill Hinman, it’s been previously believed that the agency also believes Ether to be exempt from being a security. However, recently, Gensler cast doubt on Ether, saying that any digital asset that allows users to stake is essentially a security (as CoinGeek has pointed out for months).

“From the coin’s perspective […] that’s another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others,” he told the Senate Banking Committee.

Watch: SEC Commissioner Hester Peirce on Bitcoin Association’s Blockchain Policy Matters