Gary Gensler Falters On Ethereum Being Security Vs Commodity In Hearing

Crypto News: The House Financial Services Committee Chairman Patrick McHenry in his initial arguments accused Gary Gensler of failing to explain how crypto firms should comply with the laws. The U.S. Securities and Exchange Commission (SEC) Chair faced the House Financial Services Committee in a hearing on the SEC’s oversight. In a pre-hearing testimony document, Gensler repeated his stance on the crypto market assets already being compatible with the existing securities laws.

Further, when Gensler was asked if Ethereum (ETH) was a security or a commodity, the SEC Chair failed to give a straightforward reply to the dismay of Chairman McHenry. The House Committee Chair repeatedly asked particularly about ETH given the 50 enforcement actions, to which Gensler tried to give a generic response: “it depends on the facts of the law.”

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House Committee Grills Gary Gensler

Speaking about Ethereum blockchain, McHenry recalled that in 2018, Bill Hinman, former director of the SEC’s Division of Corporation Finance, said ETH was not a security. He added that in March 2023, Rostin Behnam, Chairman of the Commodity Futures Trading Commission (CFTC) expressed that ETH was a commodity. Also mentioning the state attorney general of New York position on ETH being a security, the Committee Chair established that there was a lack of clarity about this in the market.

“Clearly, an asset can be both an security and commodity. How Gensler would categorize under the laws ETH?”

Chairman McHenry said that under Gensler’s tenure as Chair of the SEC, the agency undertook as many as 50 separate enforcement actions against the crypto market despite not clearly laying rules for operating for the stakeholders. The committee Chair said the SEC was seeking $78 million in funds to further continue in expanding enforcement actions.

“Punishing crypto market companies when not clearly mentioning rules as to how they should comply is not ideal. Regulation by enforcement is not sustainable.”

Earlier, Gensler had in his pre-hearing testimony, said crypto intermediaries were transacting in securities and have to register with the SEC, to which an all-Republican group of lawmakers opposed in a letter blasting the SEC’s views. The letter said the SEC forced crypto companies into regulatory frameworks that are incompatible with underlying technology and not applicable over laws around offering of securities. Gensler maintained in his testimony that “most crypto tokens are securities.”

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