Author: Jesse Hamilton, CoinDesk; Translated by: Song Xue, Golden Finance
U.S. cryptocurrency legislation will depend on Sen. Sherrod Brown, R-Calif., who on Tuesday reinforced his view that the industry is rife with fraudsters and abuse.
Gary Gensler, chairman of the SEC and a native Wall Streeter, described the cryptocurrency industry as the worst he had ever seen.
While SEC Chairman Gary Gensler was in the hot seat at Tuesday’s Senate hearing, the most significant crypto sentiment may have come from Sen. Sherrod Brown (D-Ohio), who cast much of the industry as dangerous scammers.
“The problems we saw at FTX are ubiquitous in crypto — failure to provide real disclosures, conflicts of interest, risky bets with customer funds that should have been safe,” said Brown, chairman of the Senate Banking Committee, which would likely have to agree to any crypto legislation to provide a regulatory framework for the industry. “FTX is the biggest and the ugliest.”
Without Brown, a stablecoin bill or a new blueprint for U.S. cryptocurrency market regulation is unlikely to emerge anytime soon, and the Ohio lawmaker praised Gensler’s agency for what the industry has complained about: enforcement oversight.
“I’m pleased that the SEC is using its tools to combat abuses and enforce the law,” Brown said.
At the committee’s routine SEC oversight hearing, Gensler reiterated his pointed skepticism of the industry.
“I’ve never seen a field so rife with misconduct,” Gensler said. “It’s daunting.”
Sen. Cynthia Lummis (R-Wyo.), a reliable ally of the digital asset industry, asked him about an SEC accounting bulletin that advises public companies to keep crypto assets on their balance sheets. The guidance, known as Staff Accounting Bulletin 121, tells public companies that if they handle cryptocurrency custody for clients, those assets must be reflected on the company’s balance sheet. Lummis argued that this could have a significant capital impact on banks, driving regulated institutions out of the business.
Gensler said SEC staff made the decision targeting cryptocurrencies because, unlike stocks and bonds, crypto assets cannot be easily segregated. He said the capital treatment of these crypto assets is not relevant to his agency.
“We don’t talk about how it’s backed,” he said. “That’s up to the bank regulator.”
The SEC, led by Gensler, has not completely ignored cryptocurrency regulation, instead taking enforcement actions against companies such as Coinbase, Binance, etc. His agency has been pursuing a series of rule proposals that have a direct impact on digital assets, although the impact is generally to make existing crypto businesses comply with existing U.S. securities laws.
Congress — including some Democratic lawmakers who have historically aligned themselves with Gensler — has been working on bills that would create specific rules for the industry, countering Gensler’s view that existing laws are sufficient. Although two of the bills have been approved by the House Financial Services Committee and some senators have floated alternatives, Brown has not yet indicated a willingness to take them up.
