Introduction

During a September 27 hearing, policymakers criticized Gary Gensler over the Security and Exchange Commission’s (SEC) non-compliance with requests for documents including records related to bankrupt cryptocurrency exchange FTX and its founder, Sam Bankman-Fried.

Policymakers Express Concerns

Rep. Patrick McHenry expressed doubts about Gensler’s commitment to addressing bipartisan legislative concerns and protecting investors, noting that Congress is “running out of patience.”

Tweet Highlights Gensler’s Ignoring of Congress

Gensler’s View on Bitcoin

“Bitcoin does not meet the Howey test which is the law of the land regarding it being an investment contract,” Gensler said of treating bitcoin as a security. However, the SEC chairman has not definitively confirmed Bitcoin’s commodity status.

FTX Collapse and Cryptocurrency Misconduct

Many policymakers mentioned the cryptocurrency and FTX collapse in November 2022, citing billions in investor losses and a handful of bankruptcies stemming from widespread misconduct by executives.

Cryptocurrencies and Existing Securities Rules

Staying true to the rhetoric of blatant fraud and misconduct in the cryptocurrency industry, the SEC chief reiterated his point about digital asset operators ignoring existing financial laws and added that cryptocurrencies fall within the scope of existing securities rules.

Video Highlights Gensler’s Wall Street Background

Accusations of Bias and Outside Bureaucracy

Representative Tom Emmer mentioned Gensler’s time at Goldman Sachs.

The policymaker implied that the SEC was no longer a neutral regulatory body because of Gensler’s political agendas and affiliations with Wall Street stakeholders.

Rep. Andy Barr also opined that Gensler was “choking” the financial markets with outside bureaucracy while Rep. Warren Davidson suggested that Congress should impeach Gensler.

SEC’s Ongoing Review of Bitcoin ETFs

Speaking about Bitcoin exchange-traded funds (ETFs), the Grayscale case, and the approval of Bitcoin ETF filings, the SEC chief pointed to his committee’s ongoing review of submissions.

The regulator has postponed its decision on ARK 21Shares’ ETF application and other filings until January 2024, News Agencies reported.

Gensler’s Response to Spot Bitcoin ETF Ruling

Gensler added that the SEC could turn to US courts over a ruling that found the US securities watchdog “arbitrary and capricious” in rejecting a spot Bitcoin ETF while the commission approved futures-related cryptocurrency funds.

House Financial Services Committee’s Letter to SEC

In a letter dated Sept. 26, about 29 members of the House Financial Services Committee urged the SEC to suspend rulemaking until the impact of the policy could be assessed.

Impending Government Shutdown and its Impact on SEC

Given the impending government shutdown, the SEC may operate without more than 90% of its staff over a period of time.

Although this development may hinder internal reviews and earlier deadlines for ETF decisions, the SEC has acknowledged that at least one filing was filed ahead of schedule.

Grayscale’s Call for Bitcoin ETF Approval

Conclusion

The SEC continues to face criticism over its handling of document requests and its decision-making process regarding Bitcoin and cryptocurrency-related matters. As the debate over regulations and investor protection heats up, the future of the SEC’s approach to the cryptocurrency industry remains uncertain.

Gensler added that the SEC could turn to US courts over a ruling that found the US securities watchdog “arbitrary and capricious” in rejecting a spot Bitcoin ETF while the commission approved futures-related cryptocurrency funds.

In a letter dated Sept. 26, about 29 members of the House Financial Services Committee urged the SEC to suspend rulemaking until the impact of the policy could be assessed.

Given the impending government shutdown, the SEC may operate without more than 90% of its staff over a period of time.

Although this development may hinder internal reviews and earlier deadlines for ETF decisions, the SEC has acknowledged that at least one filing was filed ahead of schedule.