Hester Peirce undermines Gary Gensler as Congress grills the U.S. SEC chair on crypto crackdown

U.S. SEC chair Gary Genser has appeared before the House Financial Services Committee in a hearing titled “Oversight of the Securities and Exchange Commission.” A hearing memo issued by the Committee on Financial Services Staff on September 19th revealed that the financial watchdog has not clearly defined digital assets as securities.

The U.S. Securities and Exchange Commission has found itself in the chambers of the House Financial Services Committee for a hearing titled “Oversight of the Securities and Exchange Commission.” The U.S. SEC chair Garry Gensler was also supposed to appear before the Senate Banking Committee on Sept. 25, but the hearing has since been postponed, according to Fox Business journalist Eleanor Terrett.

Part of the hearing highlighted the financial watchdog’s crackdown on digital assets and crypto, according to a memo issued by the Committee on Financial Services Staff. Garry Gensler and four commissioners (Caroline Crenshaw, Mark Uyeda, Jaime Lizárraga, and Hester Peirce) appeared before the Committee on September 24th to testify at the hearing.

U.S. SEC commissioner Hester Peirce undermines Gary Gensler’s approach to digital assets

🚨NEW: @HesterPeirce undermines @GaryGensler right off the bat, saying that the SEC has taken a legally imprecise view to mask the regulatory lack of clarity when it comes to #crypto:

“I think we've fallen down on our duty as a regulator not to be precise, and so tucking into a…

— Eleanor Terrett (@EleanorTerrett) September 24, 2024

During the hearing, Commissioner Hester Peirce undermined Gary Gensler’s approach to implementing an imprecise view on digital assets that lacked clarity. Peirce also mentioned that she thought the regulator had fallen short of its duties to enhance clarity in the industry.

Congressman Andy Barr referenced the Wells Notice issued to Coinbase identifying potential violations but refused to explain what the violations were. According to Barr, Coinbase wrote to the U.S. SEC 30 times, trying to register with the commission, but the regulator failed to respond. Barr highlighted that Coinbase submitted a petition for rulemaking that the regulator ignored.

Barr mentioned that the U.S. SEC’s administrative actions have been invalidated by courts, damaging the regulator’s legitimacy and reputation. He referenced cases where the regulator lost court cases to companies such as Grayscale and Ripple.

Hester Peirce acknowledged that some invalidated administrative actions raised legal concerns on whether the commission had the authority to execute them, but the commission still pushed through the legal cases. She added that the consistent invalidations damaged the U.S. SEC’s institutional integrity.

Congressman Loudermilk criticizes Gary Gensler’s leadership

Congressman Loudermilk accused Gary Gensler’s leadership of creating and promoting massive confusion in the crypto arena due to the lack of clarity. He also stated that the U.S. SEC faces a litany of court cases, and its inconsistencies have set the US back. 

“We have a litany of court cases, extraordinary confusion in the marketplace, and millions of Americans piling for clarity from you [Gensler]. You have abused the agency’s enforcement tools and baited companies eager to comply with you only to hit them with enforcement actions.”

–Congressman Loudermilk

Loudermilk also criticized Garry Gensler for allegedly inventing and using the words “crypto asset security” as the basis of enforcement in the last three years. 

The hearing comes amid mounting pressure between the US regulator and the crypto industry. According to data from crypto-oriented San Francisco-based investment firm Paradigm, the U.S. SEC has taken 171 enforcement actions against the crypto space, with a notable surge in actions after 17th April 2021, when the U.S. Senate confirmed Gensler as the U.S. SEC chair.