Patrick McHenry, the Chair of the United States House Financial Services Committee, has criticized the Securities and Exchange Commission (SEC) over its approach to digital assets. During an oversight hearing on April 18, McHenry used his opening statement to accuse the SEC of “punishing” digital asset firms through regulation by enforcement without a clear path to compliance. McHenry reiterated his calls for clear legislation on crypto and pressed SEC Chair Gary Gensler for a definitive answer on whether Ether (ETH) qualified as a security or a commodity.
McHenry expressed his concerns over the SEC’s actions, citing the lack of clarity and consistency in the regulatory landscape for digital assets. He accused the SEC of “chasing headlines” and penalizing companies without providing clear guidance on how to comply with regulations. McHenry also called on US lawmakers to create “clear rules of the road” for crypto through legislation.
During the hearing, McHenry pressed Gensler to give a definitive answer on whether Ether was a security or a commodity. He repeatedly interrupted Gensler’s responses that lacked specifics, citing the SEC chair’s previous labeling of Bitcoin (BTC) as a commodity and hinting at private discussions on Ether prior to the hearing.
“Clearly an asset cannot be both a commodity and a security,” said McHenry. “I’m asking you, sitting in your chair now, to make an assessment under the laws as exist, is Ether a commodity or a security?”
The question of whether Ether is a security has been a contentious issue for the crypto industry. In 2018, William Hinman, former SEC Director of Corporate Finance, stated that he did not believe Ether was a security. However, in December 2020, the SEC filed a lawsuit against Ripple Labs, claiming that the firm had sold unregistered securities in the form of its XRP tokens. The lawsuit sparked concerns among crypto enthusiasts that the SEC may also take action against Ether and other digital assets.
McHenry’s criticism of the SEC’s approach to digital assets reflects broader concerns over the lack of clarity and consistency in the regulatory landscape for crypto. The industry has faced regulatory challenges in several jurisdictions, with some countries, such as China and India, imposing outright bans on crypto trading and mining. However, other countries, including the US, are still grappling with how to regulate digital assets in a way that balances innovation and investor protection.
In conclusion, McHenry’s criticism of the SEC’s regulatory approach to digital assets highlights the need for clear and consistent regulations on crypto. While the industry continues to evolve rapidly, it is crucial that regulators provide clear guidance and support for companies to comply with regulations while fostering innovation in the sector.