SEC Chair Gensler Defends Regulatory Agenda During Contentious House Hearing

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The Securities and Exchange Commission (SEC) Chair, Gary Gensler, faced a contentious hearing before the House Financial Services Committee, during which Republicans accused him of overreaching. The hearing, which focused on cryptocurrencies and climate change disclosure rules, was the first appearance for Gensler since leadership switched to Republicans. Committee chair, Patrick McHenry, accused Gensler of refusing to provide clarity on whether crypto as part of an investment contract is subject to securities laws, and how cryptocurrency firms should comply with those laws. Gensler defended the SEC's approach to the industry, stating that crypto firms are not complying with the laws and undermining the $100 trillion capital markets. He signaled his intention to continue pushing for more enforcement action against crypto firms, reiterating that the vast majority of crypto tokens are securities.

The SEC has issued 14 enforcement actions since the beginning of January against crypto firms and individuals, while serving formal letters to Paxos, DeFi exchange Sushi, and Coinbase Global. Gensler declined to say whether ethereum, the second-largest cryptocurrency, is a security or a commodity, stating that it depends on the facts and the law.

Beyond crypto and climate change, Gensler faced a range of questions over how the SEC oversees capital markets, including the Treasury market, and how failure to raise the debt ceiling could impact capital markets. He warned that if the US failed to raise the nation's borrowing limit, it could lead to less liquidity in markets, raising the cost of borrowing and infecting the banking sector. The hearing was criticized by the top Democrat on the House Financial Services Committee, Maxine Waters, who called it "unfortunate."

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