Live: Gensler Answers to House Financial Services Committee
Rep. Warren Davidson said last week he would be introducing legislation to remove Gensler from his current post
SEC Chair Gary Gensler | Source: Third Way "Gary Gensler" (CC license)
The House Financial Services Committee will host SEC Chair Gary Gensler Tuesday morning to discuss the agency’s response to crypto regulation, investor protection and security classification.
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Hearing Updates
12:57 pm: Gensler said he holds no crypto assets and under the SEC’s ethics rules, he imagines none of his team does as well.
“You’re in the business now of making rules and regulations around digital assets,” Rep. Bryan Steil, R-Wisc., said. But, Gensler has never owned any crypto, Steil added.
12:40 pm: Davidson ends his time by calling to remove Gensler, noting his upcoming legislation.
“You can’t just exclude retail investors from markets and claim it’s for their own good,” Davidson said.
12:38 pm: Rep. Davidson asked if Ethereum is a security. Gensler does not respond.
Davidson asks if XRP, Ripple’s token is a security. Gensler responds by noting that there is an ongoing court case about this.
12:35 am: Rep. Davidson starts his time by asking if Gensler coordinated his planned responses with Senator Warren or any other Democrats. Gensler denies any pe-hearing coordination.
12:37 pm: Rep. Davidson continues by asking why Gensler has allowed investors to engage with and hold Coinbase stock if the exchange has been offering unregistered securities.
Gensler said that in certain settlements, the SEC has noted which tokens are securities.
12:30 pm — Rep. Ritchie Torres, D-N.Y., asked why, especially after FTX’s failure, the SEC has opted to not bring action against other offshore companies, like Binance.
The SEC is committed to bringing appropriate actions against any company interacting with American investors, Gensler said.
12:24 pm — Rep. Meeks (D-N.Y.) asked Gensler if he is concerned about pushing crypto firms out of the US.
“If they are complying by laws and doing right by investors, they can be here,” Gensler said.
12:14 pm — The agency has provided limited concrete guidance for digital asset firms looking to be compliant, Rep. Gottheimer said.
“The SEC, under your leadership, has largely used enforcement actions to spur compliance,” the representative said. “I’m concerned the lack of formal guidance through the normal rule making process has created even more uncertainty in the space.”
Gensler said more formal definitions and updates have been given and will come.
12:11 pm — Rep. Gottheimer notes the shortened comment period the SEC has consistently imposed under Gensler’s leadership.
Gensler counters that the SEC continues to engage with businesses even after the comment period closes.
12:06 pm — Crypto is a largely non compliant industry, Gensler said.
“I’m trying to drive it to compliance and if they are not complying with the laws…” Gensler said before Rep. Emmer yielded time back.
12:05 pm — Rep. Tom Emmer (R-Minn.), starts by asking about Gensler’s agenda and its focus on the crypto industry.
Gensler confirms that the SEC met with FTX at least twice in response to Emmer’s question.
Emmer said Gensler and his agency need to provide more clarity; “public statements are not regulations,” he added.
12:03 pm — Rep. Foster asks about the role of anonymity in preventing wash trading in crypto. Gensler responds that the exchanges need to maintain adequate records in order to keep track of buy and sell orders.
11:48 am — When companies refuse to register with the SEC, the agency has no choice but to open investigations, Gensler said in response to questions from Andy Barr, R-Kent., about the importance of keeping innovation in America.
11:27 am — The SEC only responded to Huienga’s request for information about FTX and related charges with publicly available information, the Representative said.
Rep. Huizenga once again asks for more information regarding the charges against FTX founder Sam Bankman-Fried.
11:24 am — Rep. Patrick Huizenga (R-Mitch.), criticized Gensler and his team for what he calls limited responses to requests for information from Congress. When trying to seek more information about the SEC’s ESG rules, Gensler and his office sent over mainly already public documents, Huizenga.
“I am a firm believer” in transparency and Congressional oversight, Gensler said.
11:17 am — Rep. Jim Himes (D-Conn.), starts his time acknowledging the banking crisis and the lack of risk mitigation tools in place that allowed the collapse to happen.
Retail investors are at risk of being cut out from capital markets, Himes said, and this arbitrage between public and private equity markets must be lessened.
The SEC is interested in increasing transparency around private equity and hedge fund investments, which impact everyday pension funds and retail investor retirement accounts.
11:02 am — Rep. Posey (R-Fla.) asks if Gensler had concerns about FTX prior to its collapse.
“We filed these actions in December,” Gensler said, referring to charges brought against the collapse exchange a month after it filed for bankruptcy.
“But I’ve given speeches and I’ve been clear with many members of this industry… they need to come into compliance,” Gensler said.
10:57 am — Rep. Lynch (D-Mass.) starts his time by asking Gensler to elaborate on how successful the SEC’s attempts to reign in the crypto industry.
“We’ve been quite successful throughout,” Gensler said.
Lynch asks whether or not written opinions have been created after SEC settlements or court cases in order to provide clarity to over crypto firms. Gensler said there is always a written, public document available in order to provide the industry and investors with the utmost clarity.
“There is a fair amount of clarity, it’s just not the clarity the industry wants,” Lynch said.
“Absolutely,” Gensler agreed. “This is an industry that, in the main, is built up around non-compliance… and it undermines the capital markets.”
10:56 am — Rep. Lucas (R-Okla.) comments on Gensler’s record number of enforcement actions and rule proposals, with oftentimes shorter comment periods.
“There are concerns about the high volume and fast pace of this rule making,” Lucas said.
10:46 am — Rep. Sherman advocated for all crypto assets to be labeled as securities. He suggested that Accredited Investor definitions should not be based on outdated wealth levels, but instead on knowledge.
He asked Gensler whether crypto exchanges are securities exchanges.
Gensler said, if an exchange trades in securities, then it “should come in and comply and register and protect the investing public.”
Sherman requested that the SEC shut down any exchange not complying with the law, raising the specter of FTX as an “infamous” example.
10:42 – Rep. Sessions (R-Texas) criticized Gensler for speaking his own opinions on behalf of the agency he represents. Gensler needs to make a differentiation between his options and the agency’s view.
“I think you’d ought to reevaluate that,” Sessions said. “I think that’s a complete cop-out.”
10:31 am — Vice chair French Hill (R-Ark.) raised the President’s Working Group on Financial Markets’s report in reference to stablecoins. Gensler said he supports Congress’s efforts to draft legislation on stablecoins, “with the guardrails of not undermining the $100 trillion dollar capital markets,” and mentioning Circle’s $3 billion balance at Silicon Valley bank.
10:27 am — Waters asked Gensler if the SEC has sufficient authority to oversea crypto. Gensler said yes, referring specifically to crypto intermediaries, and token issuers — without naming them.
“I’ve never seen a field that’s so non-compliant with laws written by Congress and affirmed over and over again by the courts,” Gensler said.
10:21 am — In a contentious exchange, McHenry pressed Gensler on the status of ether as a specific crypto asset. Gensler refused to answer whether he viewed ether as a security or commodity, instead referring to the “facts and circumstances” of individual crypto tokens and the Howey Test.
10:16 am — Gensler starts with his prepared testimony, where he expresses support for oversight of all federal agencies and highlights the SEC’s accomplishments under his leadership.
10:07 am — Ranking member Maxine Waters (D-Calif.) portrayed House Republicans’ approach to SEC regulation as a form of political vendetta with the goal to impede the agency’s legitimate work.
“In the last two years, we’ve filed nearly 1,500 enforcement actions and conducted more than 6,000 examinations of registrants. We engage with more than 40,000 registrants—asset managers, brokers, dealers, exchanges, fund complexes, public companies, and many more,” Gensler said. “The dedicated staff of this agency has done remarkable work with limited resources.”
10:03 am — Committee head McHenry welcomes Gensler and fellow Reps. and emphasizes the importance of today’s hearing: to establish “aggressive” oversight of the SEC.
Ahead of the hearing
Committee Republicans, led by Chair Patrick McHenry, R-N.C., are expected to grill Gensler, especially when it comes to the agency’s agenda and crypto-related enforcement actions. Many have already taken to social media to express how relentless their questioning will be.
Rep. Warren Davidson, R-Ohio, said last week he would be introducing legislation to remove Gensler from his current post, opting instead to replace the role of chair with an “Executive Director,” who must answer to a board.
Reps. McHenry and Ann Wagner (R-Mo.), also a Financial Services Committee member, also last week submitted a letter to Gensler, criticizing his agenda and accusing the SEC head of ignoring his responsibilities to investors.
The hearing kicked off at 10:00 am ET and can be streamed live.
Macauley Peterson contributed reporting.
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