Gensler faced questioning to the same effect at a House Financial Services Committee hearing on April 18, at which he was the sole witness. A chorus of criticism was led by committee chair Patrick McHenry, Republican representative from North Carolina, who asked Gensler to account for his agency’s enforcement strategy and lack of crypto-specific guidelines. “There is a lack of clarity,” said McHenry. “Do you think that provides safety and soundness for the product? Do you think it provides consumer protection? Do you think it serves the value of innovation? I think ‘no’ should be a simple answer for you.”
Warren Davidson, another Republican on the committee, claimed the SEC has imposed a “de facto ban on crypto” and went as far as to table a bill under which the SEC would undergo a restructuring and Gensler would step down from his role as chair.
Gensler maintained that crypto markets are compatible with existing SEC guidelines, that most crypto tokens are securities, and that the crypto market is therefore “rife with non-compliance.” His office declined to comment further on the record.
But not everyone at the agency is pulling in the same direction. Peirce says the effort to bring new territory under SEC control threatens to undermine its central objective: “to serve the American people.” She worries that to “grab jurisdiction” only to insist crypto businesses must either squeeze themselves into existing moulds or leave the US “defeats the point.” “It’s supposed to be the government working for the people,” she says, “but sometimes you get the sense that government is working in a way that is not consistent with what people want.”
The SEC’s quest for jurisdictional maximalization, says Peirce, risks jeopardizing the US’s status as a center of technology innovation in finance by pushing companies offshore.
Tired of what they interpret as a hostile regulatory regime, crypto businesses are starting to filter out of the US. On March 31, crypto exchange Bittrex (since sued by the SEC) announced it would wind down its US operations. On April 20, Coinbase, which is listed on Nasdaq, announced it had obtained a license to set up shop in Bermuda. Its CEO Brian Armstrong told Bloomberg that “anything is on the table,” including relocation.
“It makes me sad, because it’s about the capability of a regulator to deal with a new technology and asset class,” Peirce says. “We’re showing ourselves to be incapable of making any accommodation for experimentation.”
The five-commissioner structure at the SEC is intended to bring together divergent perspectives—something Peirce celebrates. But in her dissents, she is trying to persuade her agency peers that, on the crypto issue, the SEC has it clearly wrong.
So far, she’s had little joy. “I can’t give you the fly-on-the-wall perspective,” Peirce says. “[But] I have not been successful in convincing my colleagues that we are going down such a bad road.”
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