Highlights:
- Senator Lummis criticizes SEC’s crypto regulations, calling for clear guidelines to reduce uncertainty for digital asset companies.
- She advocates for Bitcoin and Ethereum to be regulated by the CFTC as commodities, not securities under the SEC.
- Lummis urges Congress to define agency roles and update outdated legal tests like the Howey Test for digital assets.
Senator Cynthia Lummis of Wyoming has openly criticized the U.S. Securities and Exchange Commission (SEC) for its approach to cryptocurrency regulation. In a recent interview on CNBC’s “Squawk Box,” Lummis expressed concern that SEC Chair Gary Gensler’s enforcement-driven tactics are creating uncertainty in the crypto industry.
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SENATOR LUMMIS CHALLENGES SEC’S TACTICS ON CRYPTO
Senator Cynthia Lummis is calling out the SEC's weak game, slamming Chair Gary Gensler on CNBC for relying on enforcement over clear rules, which is stifling startup growth.
She’s pushing for Bitcoin and Ethereum to be treated… pic.twitter.com/FlqGqHOQqE
— Mario Nawfal’s Roundtable (@RoundtableSpace) September 28, 2024
Lummis argued that the SEC’s reliance on enforcement actions rather than providing clear regulatory guidelines. Consequently, this hinders the growth of digital asset companies. She stated that many firms are caught in legal disputes instead of focusing on innovation and development. “Regulating by enforcement action brings about court cases instead of clear rules,” Lummis remarked during the interview.
Calls for CFTC Oversight
The senator emphasized that Bitcoin and Ethereum should be classified as commodities and regulated by the Commodity Futures Trading Commission (CFTC), not the SEC. She believes that the SEC’s current strategy of treating decentralized assets like Bitcoin and Ethereum as securities does not align with their fundamental nature. “We need a clear definition,” Lummis said, suggesting that existing tests like the Howey Test may need updating to reflect the evolving crypto landscape.
Lummis also highlighted the need for Congress to step in and establish clear regulatory frameworks. She stressed that without legislative action to define the roles of different agencies, the U.S. risks falling behind other regions like the European Union, which implemented comprehensive crypto regulations in 2023.
Legislative Initiatives and Concerns
To address these regulatory gaps, Lummis, alongside Senator Kirsten Gillibrand, has proposed changes to existing laws. This includes modifications to the wash sale rule. This change aims to increase funding for the CFTC, enhancing its capacity to regulate digital assets effectively. Lummis believes that a well-funded CFTC can provide more appropriate oversight without stifling innovation.
Additionally, Lummis and other lawmakers have criticized the SEC’s Staff Accounting Bulletin 121 (SAB 121). The SAB 121 requires crypto custodians to list customer assets as liabilities. In a letter to Gensler, they argued that this rule places undue burdens on the industry and called for its withdrawal.
Gensler’s Response
In response to the criticism, SEC Chair Gary Gensler maintains that the agency already has the necessary regulations in place. He has stated that “not liking the rules is not the same as there being no rules.” Gensler emphasizes that the SEC’s primary focus is investor protection and that many crypto firms have benefited from public interest without providing adequate disclosures.
While Gensler acknowledges Bitcoin as a commodity, his stance on Ethereum remains less clear. Despite this ambiguity, the SEC has allowed the launch of Ethereum-based Exchange-Traded Funds (ETFs), which some interpret as tacit approval of its commodity status.
Lummis warns that without clear regulations, the U.S. could lose its competitive edge in the global financial services market. She urges Congress to act swiftly to define agency roles and establish a regulatory framework that fosters innovation while protecting consumers. “We cannot let other countries get ahead in financial services,” she cautioned.
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