The US Securities and Exchange Commission (SEC) is facing a growing number of calls to limit its oversight of the cryptocurrency industry, and these calls are coming from inside and outside the House of Representatives.
The US House of Representatives Financial Services Committee voted on Thursday to appeal House Accountability Bill 121, which has been used since March 2022 to prevent banks from serving as custodians of digital assets. When it was passed, the SEC emphasized that the measure would protect against “the significant risks and uncertainties associated with protecting crypto assets.”
But now there is mounting criticism from House committee members about how SAB 121 was enacted.
“The SEC issued SAB 121 without consulting prudential regulators who are experts in regulating bank custody,” said Rep. Mike Flood (R-Neb.). “This is a very big mistake.”
In October, a Government Accountability Office report took issue with the way SAB 121 was enacted — without the SEC submitting a report to Congress — and how it has since been used as an alternative to more realistic regulatory guidance.
“This guidance was introduced to protect investors from the mishandling of clients’ crypto assets by custodians, a practice that was at the heart of FTX’s stunning collapse when billions in crypto assets disappeared,” Rep. Maxine Waters (D-Calif.) said Thursday during a press conference. “. House committee meeting.
The SEC is in “enforcement only mode.”
but this is not all. Yesterday, eleven US state attorneys general filed a joint amicus brief in the regulator’s lawsuit against Payward Ventures – the parent company of cryptocurrency exchange Kraken – to challenge the SEC’s authority over cryptocurrency companies.
“The enforcement actions taken by the SEC exceed its delegated authorities,” the lawyers said in the filing. “The Court should decline to classify cryptoassets as securities in the absence of an investment contract. The SEC’s exercise of this non-delegated authority puts state consumers at risk by preempting state laws better designed for specific risks related to non-securities related products.”
The brief was filed by attorneys general from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota and Texas.
On the same day, SEC Commissioner Hester Peirce said during an ETHDenver event that the regulator remained stuck in “enforcement-only mode.” The knock-on effect for developers, she said, was constant worry about what and how to build new technology that would keep them out of the crosshairs.
“What I reflect is the fact that you are all spending some of your mental power” wondering how to avoid being sued, she said at the event yesterday. “If we had clearer rules, we could focus on building them.”
